Book Review: ‘Myth of the Rational Market’ by Justin Fox

Muaz Halees

Roger Lowenstein has recently declared that “the upside of the current Great Recession is that it could drive a stake through the heart of the academic nostrum known as the efficient-market hypothesis (EMH).”

Is this true? Who knows.

The efficient market hypothesis has become the “mark-to-market” of opponents to stock market regulators. Just as accountants claim that the mark-to-market rule has been the cause of undervalued assets, Justin Fox and his brethren have claimed that the EMH have caused the current recession

Justin Fox writes The Curious Capitalist column for Time Magazine, which, surprisingly, is not about a sexually confused economist. His columns are very detailed, educational, and grounded in economic theory. It comes as no surprise that his book reads like an extended column—which is both praise and condemnation.

He imparts two very clear lessons—both of which are so simplistic that calling them lessons may well be offensive to schools. His first claim is that “the markets are smarter than you are” and his second is that “the majority of fund managers fail to accurately judge the market and actually reduce the chance of an investor to turn a profit.” Some of his claims that didn’t make it into the book were that grass is green, that the sun is hot. Groundbreaking stuff, I know.
Fox begins his extended column with the story of economist Irving Fischer in 1929. He then ties the stories and stances of old-world economists to those of their contemporaries. He also develops his second hypothesis by highlighting the numerous economists over the years that made similar claims.

Fox builds his book around the inception and maturation of EMH. He takes the reader from its position as hypothesis, to its position as fact, to what he claims it should be—myth. His easy-to-read and at times intolerably bland account of the rise and fall of the EMH ends in a profound and powerful assertion: How can a theory that asserts all market prices and movements are unknowable in the present be used to determine the market’s present day prices and movements?
Fox’s book comes off as an attempt to pin the blame of the market’s recent crash to any number of factors. His claims that asset beta may be fraudulent and evil, economists knowingly gifted the public with flawed theories, and that the capital asset pricing model is increasingly irrelevant all lead to his contemptuous treatment of the efficient market hypothesis. While his words should not be taken as gospel, his book should make it into the library of anyone concerned with the machinations of the market.

One question that I was left with (which may bother you as well) is how can rationality ever be used in tandem with something as inherently irrational as the market?

Book Review: The Wordy Shipmates by Sarah Vowell

Muaz Halees

Sarah Vowell is the girl you crushed on in high school, even though you were embarrassed because she was emo and nerdy.   She grew up to be a writer and now she is funnier, smarter, and more relevant than you.  But you can still connect to her through The Wordy Shipmates.  In her fifth book she has masterfully married sarcasm, pop culture, twitter tics, poignant one-liners, and the Massachusetts Bay Colony. 

Her pedantic attention to detail can be appreciated by even the most ardent, popped-collar wearing, Bud Light-drinking frat boy.  She is a high-browed historian, except her high brow is pierced.  The only nauseatingly pompous part of the book is her acknowledgments section, which is a master’s class in name dropping.  But alas, if the Puritans have downfalls, then so can she.   

She skips the more famous Pilgrims and focuses on their less noteworthy counterparts, the Puritans–along with their establishment of the Massachusetts Bay Colony.  The religious texts are keenly broken down by Vowell, who is a renowned atheist.  The Puritan religious message is praised and used to highlight the lowlights in the religious message of today’s holier-than-thou pontificators.  Vowell claims that the classic teachings of Puritan John Winthrop comforted her following Sept. 11^th and served as her inspiration for The Wordy Shipmates. 

The book begins with the departure of hundreds of English colonists and the difficulties faced as they establish the aforementioned Massachusetts Bay Colony.  She highlights the pains they went through dealing with the scarcity of food, shelter, and safety.  The Wordy Shipmates analyzes the lives of New Englanders during the tumultuous 1630s.

This book was my vessel, for one week, to escape the torpor and monotony of my daily grind.  She portrays the Puritans as they were: mirror images of us.  They were more than the cold, devout, dour individuals we perceive them to be.  They had conflicts between spirituality and society; they were intelligent, courageous, and awkward. 

There is an important story of America professionally placed within Vowell’s sardonic prose.  The Puritans left England to battle the brutal conditions of the new world.  They held onto England while forging ahead with their goals.  There are so many lessons in this book for us.  In a few short months we will face the hardships of a new world and we must stay the course and brave the treacherous conditions.  The Wordy Shipmates may provide some insight into ourselves while imploring us to laugh at the comedy of the human condition.