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AirTalk

Risk, reward, and delusion on Wall Street

By AirTalk Staff
Published Dec 3, 2009
The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
(
HarperBusiness
)
Listen 31:01
Risk, reward, and delusion on Wall Street
The financial crisis gripping global markets was unleashed in part because investors in mortgage securities thought they knew what they were doing and that prices set for securities accurately reflected the risks at stake. The theory that markets behave logically, is rooted in early 20th century ideas from physics and mathematics that trickled into economics. The premise soon traveled beyond the stock market to other securities and especially to derivatives. But Justin Fox, TIME magazine’s economics columnist, challenges the notion that markets can regulate themselves. Fox joins Larry in studio to discuss his new book, "The Myth of the Rational Market."

The financial crisis gripping global markets was unleashed in part because investors in mortgage securities thought they knew what they were doing and that prices set for securities accurately reflected the risks at stake. The theory that markets behave logically, is rooted in early 20th century ideas from physics and mathematics that trickled into economics. The premise soon traveled beyond the stock market to other securities and especially to derivatives. But Justin Fox, TIME magazine’s economics columnist, challenges the notion that markets can regulate themselves. Fox joins Larry in studio to discuss his new book, "The Myth of the Rational Market."

Guest:

Justin Fox, author of "The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street" (HarperBusiness). He is the TIME editor-at-large and economics columnist and writes the popular Time.com blog The Curious Capitalist