The Myth of the Rational Market

In view of the collapse of Wall Street giants that brought the world economy to its knees, it does not seem strange to find so many books devoted to the current financial crisis. Justin Fox’s The myth of the rational market is one of these books. But, even though the book touches on Wall Street, it is not about mishandlings on Wall Street, but about faults of University of Chicago, the bastion of the dominant theory of finance – efficient market theory. In other words, Justin Fox does not have a quarrel with the practice of finance but with its theory. The book does not criticize complex mathematical and statistical models, but the assumptions on which these models are based. As a result, the book is accessible to the wider public, and not just to finance/math geeks. It presents a historical development of the dominant theory of finance, how it came to dominate Wall Street, its flaws and ultimately its fall. The book is divided into five parts with 16 chapters, along with introduction and epilogue.