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Forecast

Forecast

By Mark Buchanan

What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics. Bloomsbury, 2013.

5.0 / 2

17 mins read

14 Key insights

A brief summary of Forecast

A deep critique of economics using weather as a metaphor for explaining the problems modern-day economists face when making financial predictions using a flawed system, and how we can be better prepared for the instability of the market.

Key insights in Forecast

1
What do you get from this book? How meteorology and other sciences can help us understand economics and improve our predictions
2
“Positive feedback” is responsible for surprise market crashes, though economists blame balance and equilibrium
3
Throughout history, mathematicians helped reform economic theories, leading to the “efficient market hypothesis”
4
There are many theories that attempt to explain market equilibrium, though they tend to fall short under serious scrutiny
5
The stock market is unpredictable, but it’s not always random—the “bell curve” and “fat tail” demonstrate patterns
6
Universal concepts such as fractals and game theory shape how social scientists form their economic hypotheses
7
Chess helped disprove “rational expectation theory” and demonstrated how changing tactics influence outcomes
8
“Chartists” destabilize the market with their buying and selling techniques, but collective feedback loops also contribute
9
Stock prices change so fast, humans cannot always make clear trading decisions, trusting computer algorithms to do it for them
10
Keynesian economics and “Microfoundations” have failed to make accurate predictions
11
Reflexivity, collateralized loans, and margin calls add to dangerous cycles of instability
12
Summary of the key insights
13
Selected critiques in brief
14
Final word

Who should read Forecast

Economists • entrepreneurs • investors • business owners • bankers • anyone with an interest in finance

About the author of Forecast

Physicist Mark Buchanan specializes in complexity studies, quantum theory, and science writing. In 2009, he was awarded the Lagrange Prize for his contributions to the field. Editor for Nature and New Scientist, his articles have also appeared in the New York Times and Harvard Business Review.

author avatar

Mark Buchanan

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