Forecasters predicted a prosperous year in 2008 for financial markets: in one influential survey the average prediction was for an eleven percent gain. But by the end of the year, the Standard and Poor's 500 index, a key economic barometer, was down 38 percent and major economies were plunging into recession. Even the Queen asked: 'Why did no one see it coming?' An even bigger casualty was the credibility of economics, which for decades has claimed that the economy is a rational, stable, efficient machine, governed by well-understood laws.
Mathematician David Orrell traces the history of this idea from its roots in ancient Greece to the financial centres of London and New York, showing how it is mistaken, and proposing new alternatives. Economyths explains how the economy is the result of complex and unpredictable processes; how risk models go astray; why the economy is not rational or fair; why no woman has ever won the Nobel Prize for economics; why financial crashes are less Black Swans than part of the landscape; and finally, how new ideas in mathematics, psychology, and environmentalism are helping to reinvent economics.
