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A slim volume, you might imagine, but Mr Dougherty reels off a long list of those who have put aside equations and supplied a well-turned phrase to explain the dismal science.
Adam Smith wrote memorably sometimes, but he is a harder read than John Maynard Keynes or Milton Friedman, let alone John Kenneth Galbraith, so stylish a writer that he was once asked to join the English faculty at Berkeley. He believes there is more talent among economics writers now than ever, perhaps fittingly as a result of fiercer competition.
Only a few years ago, his work would have been praised more for its readability than its insights. But he lived to see his best-known book become essential reading on Wall Street and be cited approvingly by younger, more mathematically inclined academics. He argued, not wholly originally, that several common threads linked these different disasters over the centuries in almost all corners of the financial world.
Manias, or bubbles, have typically occurred in the markets following unexpected good news, and so reflect progress of sorts. His book first appeared in , when most economists who studied finance were in thrall to efficient-markets theory, which in its purest form rules out the possibility of bubbles.
In so far as it acknowledged past bubbles, the theory blamed them on immature, fraud-prone markets and argued that they were unlikely to occur in sophisticated, well-regulated, modern settings. The recent dotcom bubble, following such other apparent inefficient-markets events as the stockmarket crash and the Asian meltdown of , changed that, although pure efficient-markets theory was by then already under fierce attack.
Mr Kindleberger's work suddenly seemed spot on. Now, studying bubbles is all the rage in academia. There are several schools of thought. Perhaps more interesting has been the reaction of those most loth to abandon rational Homo economicus. Only a few old believers cling to the idea that the rise in dotcom share prices genuinely reflected likely profits, and that their sudden plunge was caused by regulatory in activity.
Most prefer to ask why informed, rational investors failed to arbitrage away the absurdly high prices caused by irrational buying, as efficient-markets theory predicts. This may discourage arbitrage that would bring the market back to its senses. In a similar spirit, Matthew Richardson of New York University argues that a limited float of dotcom shares prevented short-sellers from borrowing shares to sell.
When the supply of shares rose, the bubble popped. Others argue that investors who saw that the market had gone daft may quite rationally have driven prices up further, believing they could get out faster at the peak than the greater fools who would buy shares from them. Not everybody is convinced by such theories. Economists are split over the recent performance of America's lender of last resort, the Federal Reserve.
Some argue that its policy of easy credit inflated the bubble, although nobody can be certain what effect tighter money would have had once the bubble began to expand. Some economists believe that the Fed's interest-rate cuts since the bubble burst have been a triumph, preventing a severe recession. Others think that the Fed has merely postponed the day of reckoning. We will never know what conclusion Mr Kindleberger would have reached.
What is certain is that he would have expressed it with clarity and wit. The best introduction to the behavioural finance approach to bubbles remains " Irrational Exuberance ", Princeton University Press , by Robert Shiller, first published at the peak of the bubble in March Reuse this content The Trust Project.
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Manias, Panics, and Crashes: A History of Financial Crises
A slim volume, you might imagine, but Mr Dougherty reels off a long list of those who have put aside equations and supplied a well-turned phrase to explain the dismal science. Adam Smith wrote memorably sometimes, but he is a harder read than John Maynard Keynes or Milton Friedman, let alone John Kenneth Galbraith, so stylish a writer that he was once asked to join the English faculty at Berkeley. He believes there is more talent among economics writers now than ever, perhaps fittingly as a result of fiercer competition. Only a few years ago, his work would have been praised more for its readability than its insights. But he lived to see his best-known book become essential reading on Wall Street and be cited approvingly by younger, more mathematically inclined academics.
Manias, Panics and Crashes
Albert U. Romasco, Charles P. New York: Basic Books. Most users should sign in with their email address. If you originally registered with a username please use that to sign in. To purchase short term access, please sign in to your Oxford Academic account above.
Would you like to tell us about a lower price? If you are a seller for this product, would you like to suggest updates through seller support? The manner in which human beings earn their livings is no laughing matter to him, especially when they attempt to do so at the expense of one another. As he so effectively demonstrates, manias, panics, and crashes are the consequence of an economic environment that cultivates cupidity, chicanery, and rapaciousness rather than a devout belief in the Golden Rule. Manias, Panics, and Crashes is a durable guide to meditation: wise, witty, and practical.
It seems that you're in Germany. We have a dedicated site for Germany. Authors: Kindleberger , C. Manias, Panics and Crashes , is a scholarly and entertaining account of the way that mismanagement of money and credit has led to financial explosions over the centuries. Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book has been hailed as 'a true classic