"Market crises are an integral part of our economic system", writes Executive Vice President and Chief Economist at ITG and Economics Department Fellow at Johns Hopkins University Robert J. Barbera, in his insightful and paradigm challenging book The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future. The author supports strong the concept that capitalism is the best economic system, but takes to task mainstream market economists who have embraced the mistaken view that capitalism as infallible.Robert Barbera presents a solid case that cycles end following excesses in the market, concluding with market upheaval and retrenchment. The author points out that this obvious reality of capitalist markets has been ignored, and even suppressed, by mainstream economists. Robert Barbera applies the important insights of economist Hyman Minsky to his analysis of the current economic crisis. Minsky made the case that stability and economic tranquility led to over confidence that these temporary conditions were permanent features of the economy. As a result, confidence grows leading to the taking of excessive risks, driven by greed and herd instinct. Because many of the investors become over confident, and leverage their investments too heavily, even a very small economic downturn renders large numbers of investors insolvent. Understanding this inherent instability of capitalism, that results in periodic market disruptions, is a crucial element of the book.
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