Forecast
By Mark Buchanan
What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics. Bloomsbury, 2013.
Summary of Forecast book by Mark Buchanan
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.
Chapters in Forecast book summary
What do you get from this book? How meteorology and other sciences can help us understand economics and improve our predictions
“Positive feedback” is responsible for surprise market crashes, though economists blame balance and equilibrium
Throughout history, mathematicians helped reform economic theories, leading to the “efficient market hypothesis”
There are many theories that attempt to explain market equilibrium, though they tend to fall short under serious scrutiny
The stock market is unpredictable, but it’s not always random—the “bell curve” and “fat tail” demonstrate patterns
Universal concepts such as fractals and game theory shape how social scientists form their economic hypotheses
Chess helped disprove “rational expectation theory” and demonstrated how changing tactics influence outcomes
“Chartists” destabilize the market with their buying and selling techniques, but collective feedback loops also contribute
Stock prices change so fast, humans cannot always make clear trading decisions, trusting computer algorithms to do it for them
Keynesian economics and “Microfoundations” have failed to make accurate predictions
Reflexivity, collateralized loans, and margin calls add to dangerous cycles of instability
Summary of the key insights
Selected critiques in brief
Final word
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Forecast — Book Summary Snapshot
Who should read Forecast book
- entrepreneurs
- business owners
- anyone with an interest in finance
About the author of Forecast
Mark Buchanan
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.
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Allen Lane, 2010.
Stian Westlake
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Alan S. Blinder
The Financial Crisis, the Response, and the Work Ahead. Penguin, 2013.
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