The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
By Justin Fox 2009
400 pages
A history of the Rational Market hypothesis. Chronicles the first rigorous use of mathematics and game theory to study economic behavior, the people who did it and its effects on financial markets. Documents the movement of ideas about the rational market from economics to finance and finally to large trading operations. Shows how academic theories leave the tower through the work of many prominent economists and what they leave behind in the process. Take away message: A theory is only as good as its assumptions. People are creatures of habit with little historical perspective.