The Origin of Financial Crises: Central Banks, Credit Bubbles and the Efficient Market Fallacy

Cooper manages to cram into 170 small pages ideas that a competent author sympathetic to the expenditure of his readers' time might encompass in 15 small pages. Its ideas are simple:(1) The notion of "efficient markets" has, at least since Maynard Keynes, been discredited.(2) Financial markets differ from markets for goods and services: while the latter can exhibit negative feedback, the former almost invariably are plagued with positive feedback.(3) Positive feedback, as every engineer knows, is subject to runaway behavior limited only by some form of undesirable event--a crisis.(4) All this was worked out by James Clerk Maxwell (1868), John Maynard Keynes (1934), and Hyman Minsky (1974). It is not applied to best effect, even by central bankers, notwithstanding that these are insulated from political interference.The book includes a few persuasive examples and (of course) avoids even a hint of differential equations.The book has one welcome aspect--reminding its reader of James Clerk Maxwell's 1868 paper "On Governors". It cribs this by excerpting its first two pages.