(K. Brent Tomer),
The End of Theory: Financial Crises, the Failure of Economics and the Sweep of Human Interaction By Richard Bookstaber. Princeton University Press; 240 pages; $29.95 and £24.95.
AS QUEEN ELIZABETH II famously once pointed out, most economists failed to predict the crisis of 2007-08. In a lecture to the American Economic Association in 2003, Robert Lucas argued that macroeconomics had succeeded in so far as the “central problem of depression prevention has been solved, for all practical purposes”. Yet within five years the world faced its worst crisis since the 1930s.
In his new book, “The End of Theory”, Richard Bookstaber approaches the issue from a different direction, as someone who has managed risk at leading investment banks and hedge funds. He believes that “traditional economic theory, bound by its own methods and structure, is not up to the task” of predicting crises.
The author argues that the…Continue reading