Beyond mechanical markets : asset price swings, risk, and the role of the state / Roman Frydman and Michael D. Goldberg.

Includes bibliographical references and index

Machine generated contents note: The Fatal Flaw -- Assuming Away What Matters Most -- The Imperfect Knowledge Alternative -- Fishermen and Financial Markets -- The Survival of the Rational Market Myth -- Opening Economics and Finance to Nonroutine Change and Imperfect Knowledge -- Imperfect Knowledge Economics and Its Implications -- A New Understanding of Asset-Price Swings, Risk, and the Role of the State -- pt. I The Critique -- 1. The Invention of Mechanical Markets -- Economists' Rationality or Markets? -- Was Milton Friedman Really Unconcerned about Assumptions? -- The Post-Crisis Life of Interacting Robots -- Missing the Point in the Economists' Debate -- The Distorted Language of Economic Discourse -- 2. The Folly of Fully Predetermined History -- The Fatal Conceit Revisited -- The Pretense of Exact Knowledge -- The Economist as Engineer -- Staying the Course in the Face of Reason

3. The Orwellian World of "Rational Expectations" -- Muth's Warning Ignored -- The Rational Expectations Revolution: Model Consistency as a Standard of Rationality -- The Spurious Narrative of Rational Expectations -- A World of Stasis and Thought Uniformity -- Economists' Rationality and Socialist Planning -- 4. The Figment of the "Rational Market" -- Pseudo-Diversity in the "Rational Market" -- The Irrelevance of the "Rational Market" -- Beware of Rational Expectations Models -- The Fatal Conceit of the Rational Expectations Hypothesis -- 5. Castles in the Air: The Efficient Market Hypothesis -- The Market Metaphor -- Imagining Markets in a Fully Predetermined World -- Samuelson's Doubts -- The Illusory Stability of the "Rational Market" -- Efficient Market Hypothesis and Asset-Price Swings -- 6. The Fable of Price Swings as Bubbles -- Rein venting Irrationality -- Bubbles in a World of Rational Expectations: Mechanizing Crowd Psychology

A Seductive Narrative of Behavioral Bubbles -- Limits to Arbitrage: An Artifact of Mechanistic Theory -- The Trouble with Behavioral Bubbles -- Forgotten Fundamentals -- pt. II An Alternative -- 7. Keynes and Fundamentals -- Was Keynes a Behavioral Economist? -- Imperfect Knowledge and Fundamentals -- Are Fundamentals Really Irrelevant in the Beauty Contest? -- Fundamentals and Equity-Price Movements: Evidence from Bloomberg's Market Stories -- 8. Speculation and the Allocative Performance of Financial Markets -- Short-Term and Value Speculators -- How Short-Term Speculation Facilitates Value Speculation -- Speculation and Economic Dynamism -- 9. Fundamentals and Psychology in Price Swings -- Bulls, Bears, and Individual Forecasting -- Persistent Trends in Fundamentals -- Guardedly Moderate Revisions -- Price Swings in Individual Stocks and the Market -- Price Swings, Genuine Diversity, and Rationality -- Sustained Reversals -- 10. Bounded Instability: Linking Risk and Asset-Price Swings

The Indispensable Role of Asset-Price Swings in Allocating Capital -- Historical Benchmarks as Gauges of Longer-Term Prospects -- The Unfolding of Excessive Price Swings -- Linking Risk to Distance from Benchmark Levels -- How Markets Ultimately Self-Correct -- The Return of Fundamentals -- 11. Contingency and Markets -- Contingent Market Hypothesis -- Contingency and Instability of Economic Structures -- The Fleeting Profitability of Mechanical Trading Rules -- Temporary Profit Opportunities -- An Intermediate View of Markets and a New Framework for Prudential Policy -- 12. Restoring the Market-State Balance -- The Importance of Policy Reform for Financial Markets -- Rationale for Active State Intervention in Financial Markets -- Excess-Dampening Measures and Guidance Ranges -- Active Excess-Dampening Measures -- Excessive Price Swings and the Banking System -- Imperfect Knowledge and Credit Ratings -- What Can Economists Know? -- The Search for Omniscience -- Sharp versus Contingent Predictions -- Recognizing Our Own Imperfect Knowledge -- Imperfect Knowledge Economics as the Boundary of Macroeconomic Theory.