In that other blog I write, I have whined a teensy little bit about Paul Krugman and The Economist failing to throw in a mention of my book in their recent pieces on what went wrong with economics. So it was great to see, in Ryan Lizza’s epic account of economic decisionmaking in the Obama White House in this week’s New Yorker, a largely unnecessary reference to The Myth of the Rational Market:
Summers told me that, as a graduate student, he first studied claims, made famous by economists at the University of Chicago, that financial markets are always rational and self-correcting. He said, “I encountered a sentence that was much quoted: ‘The efficient-market hypothesis is the best established fact in social sciences.’ Any sentence like that is a red flag to an ambitious academic.” Summers produced a body of work that undermined the efficient-market hypothesis, or E.M.H. A memorable paper on the subject, which he wrote in the early eighties but never published, began, “THERE ARE IDIOTS. Look around.” According to Justin Fox’s recent book, “The Myth of the Rational Market,” that paper persuaded Fischer Black, one of the leading theorists of E.M.H., to essentially abandon his belief in the hypothesis.
I don’t know that I’d say Fischer Black abandoned his belief in the efficient market hypothesis. He just loosened it a lot. But I’m thrilled that Lizza, whom I’ve never met, saw fit to bring up the book. We have reached the point in Myth‘s sales trajectory where little mentions here and there seem essential to keeping it from fading into, if not oblivion, some place I’d rather not see it go. So little things, like a short review in the October Harvard Business Review that doesn’t appear to be available online to non-subscribers, or a rave in the Las Vegas Business Press, or a brief mention in the New Yorker, start mattering a lot.