By Dermot Smyth
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Issue 389

Mark Buchanan’s book, Forecast, is a demolition of the core assumptions of economic theory.

Buchanan draws on studies carried out by physicists and other scientists to demonstrate that markets are inherently chaotic — rather like the weather, hence the meteorology in the subtitle, “What Physics, Meteorology and the Natural Sciences can Teach us about Economics”.

The difference is that weather models allow a degree of accurate forecasting. Not so for economics. This comprises many interacting markets, driven by thousands of speculators gambling trillions of pounds.

Unsurprisingly, the chaos that results is more complex than the weather. Existing negative-feedback models that predict balancing of supply and demand, efficient pricing, channelling of investment capital towards areas of need, and so on, are shown to be fiction.

Buchanan has a sober view of the markets. He writes, “To avoid any misunderstanding, I want to be absolutely clear that no amount of better economic science will prevent financial crises in the future.”

He backs this view up with a wealth of interesting insights. Buchanan demonstrates convincingly that instability does not spring from excessive “leveraging” or “fraudulent behaviour”, but naturally from speculative markets.

Sadly, like so many other books on the crisis, Forecast goes soggy in its conclusion. In the face of unpredictability of capitalist markets, all Buchanan offers is to “make our ignorance less dangerous than it would otherwise be.”

Read the main chapters to reaffirm 150 years of Marxist economic thinking. Read the last chapter as an object lesson in failure of imagination and self-criticism in even the best reformists.

Forecast, by Mark Buchanan. Published by Bloomsbury.

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