Excellent and very detailed
I am not an economics major. Cooper explains the core concept of finance , central banking in such a way that even a layman can understand. His arguments are very convincing . A must read for everybody wondering what is going on with our economy
Excellent! A must read.
This is an emminently readable review of the 'dismal science'.
The prose is clear frank and honest.
If the new administration really wants to try and repair our financial system, they should consult George Cooper.
This is amateur hour
If I could make it a zero star rating I would. After 30 pages I am throwing it in the recycling bin. This book is a joke; recycled ideas, jacked up only by emotional statements and thoroughly uninsightful. A total waste. I am tempted to end my subscription to the Economist for its apparent endorsement of this waste.
COOPER HAS WRITTEN A READABLE MASTERPIECE
I completely agree with the positive recommendations of The Economist Magazine and the reviewers. George Cooper has combined a strong technical and practical investment background to produce a modern thoughtful study of how to best manage our complex economy. However, I disagree with Brady on its readability, I feel Cooper opens this subject up to any thoughtful investor {regardless their background) by writing in down-to-earth English. He uses everyday examples, like a baker making and selling bread. His clear understanding of the material and deep sympathy for the reader motivate him to use such everyday examples to completely dispense with mathematical equations. He still maintains the needed precision.
I was persuaded that economic crises are inevitable, and enjoyed his ideas on how we might deal with them. I want to encourage every investor and student who is curous about how we can improve our economy to read Cooper's clear, cogent presentation.
4.5 stars-Cooper has connected all of the dots except one-he missed Keynes
Cooper has written a book that currently must be judged to be superior to any other book written on the Subprime mortgage backed bond catastrope that has led the American Treasury Secretary Paulson to advocate the government purchase of about 1 trillion dollars of bank and investment bank assets about which no one has the slightest idea of what their true worth is.
Cooper simply and easily dismantles the Efficient Market Hypothesis(EMH)that is the foundation of modern finance theory.This hypothesis is also the foundation of ALL modern macroeconomic theory.The EMH goes under the name rational expectations,real business cycles,New Classical Economics,and New Keynesian Economics in macroeconomics.Underlying both is the Subjective Expected Utility(SEU)decision theory,a hybrid of the Frank Ramsey,Bruno De Finetti,and Leonard J. Savage subjectivist theory of probability that is combined with the Von Neumann and Morgenstern expected utility theory.This theory assumes that the weight of the evidence available to decision makers is complete.This means that all decision makers know and can apply a unique probability distribution's mean and standard deviation, or act " as if " they did,before they make any decision.This case is a very special case of Keynes's weight of the evidence variable,w, where w=1.w is defined on the unit interval between 0 and 1 (Ellsberg's rho variable gives the same results as Keynes's w because rho is also defined on the unit interval.A rho =1 means that the decision maker has complete confidence in his information set and can specify a unique probability distribution).
The efficient market hypothesis assumes that w and rho =1,just as the rational expectations hypothesis does.Cooper,unfortunately,overlooks the fact that Minsky's financial fragility hypothesis,which shows how waves of speculation ,magnified and amplified by bank loans to speculators ,will morph into Ponzi finance schemes that lead to the collapse of the bubble and a crash , is directly built on Keynes's Chapter 21 analysis in his General Theory(1936;GT) which integrated Keynes's weight of the evidence analysis concerning w from chapters 6 and 26(sections 7 and 8) of the A Treatise on Probability(1921;TP)into his elasticity analysis on pp.304-306 of the GT.The crucial result is that a complete information set requires that the macro elasticity e = 1(or ed subscript =1).A e = 1(this means the same thing as w = 1 or rho = 1)means that there is a complete information set that allows decison makers to calculate the riskiness of different alternative portfolios.The Efficient Market Hypothesis and Rational Expectations hypothesis will both hold.There will be no uncertainty or ambiguity(Ellsberg's term),only risk.However,Keynes points out that the general case is that e < 1(so both w < 1 and rho < 1).Uncertainty exists and results in a speculative demand for money.The greater the speculative demand for money is the greater the amount of involuntary unemployment and economic instability that will result.I have deducted 1/2 of a star because Cooper overlooks the fact that Keynes had already demonstrated theoretically that a Minsky crisis can occur whenever w or rho or e is less than 1.Minsky himself had absolutely no understanding of the technical results derived by Keynes in chapter 21 of the GT because he never read either chapter 20 or chapter 21.There is nothing new,original,or innovative in Minsky's work.
Cooper redeems himself by showing how Mandelbrot's analysis of his general 4-parameter model, built around the Cauchy distribution's dangerous wild risk ,that, practically, goes out as far as 25 standard deviations ,demonstrates the special case nature of both modern finance theory and modern macroeconomic theory.Both theories are built on the Normal distribution's plus or minus 3 standard deviations covering 99.7 % of all outcomes.The Normal distribution is a special case of the Cauchy distribution.Heavy government regulation of the financial and banking system,aimed at stopping banker financed speculation ,can, as argued by Adam Smith(The Wealth of Nations,1776,Modern Library(Cannan)edition,pp.260-340) over 230 years ago in his 80 page discussion of why a central bank was needed,prevent the boom-bust turbulence of the Cauchy distribution from arising.A heavily regulated financial and macroscopic system can artificially create normally distributed outcomes with no more than plus or minus 3 standard deviations ,thus preventing the wild risk of the Cauchy from destroying the financial system.Deregulation and privatization automatically unleach the destructive potential of the Cauchy.Cooper covers this satisfactorily,but somewhat unevenly,in chapters 2,4,7,and 8 of his book.
This book is not meant for the general reader.The potential buyer needs to be familiar with both modern finance theory(EMH) and macroeconomic theory(REH) ,as well as Mandelbrot's work,to understand why the world's financial markets can be destroyed in a deregulated environment of the type that has been constructed between 1978 and 2008 in the United States and the World.
(7 reviews)
