The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street

The acclaimed New York Times bestseller—“the rare business history that reads like a thriller” (Publishers Weekly)—that tells the story of how we came to believe that financial markets knew best and how that belief steered us wrong, now updated to reflect the latest academic research and market developments.

The financial crisis of 2008 and the subsequent Great Recession seemed to demolish many cherished beliefs—most significantly, the theory that financial markets always get things right. Justin Fox’s The Myth of the Rational Market, first published in 2009, explained where that idea came from and where it went wrong.

Our reliance on financial markets hasn’t gone away, and the book’s themes are as relevant today as in the aftermath of the financial crisis. An intellectual whodunit, The Myth of the Rational Market brings to life the people and ideas that forged modern finance and investing—from the formative days of Wall Street through the Great Depression to the financial escapades shaping our lives and economy today. It’s a tale of professors who made and lost fortunes, battled fiercely over ideas, beat the house at blackjack, wrote bestselling books, and played major roles on the world stage.

In this new edition, Justin Fox revisits his classic text. All-new material includes

• An update on developments in academic economics and finance, which launched rational market theory and are still contending with how much imperfection and irrationality to incorporate into models of financial markets.
• A look at what these theories have to tell us about such market phenomena as the triumph of index funds, the rise of cryptocurrencies, meme stocks, the artificial intelligence investing boom, and Elon Musk.

A sweeping history hailed for lively storytelling that makes complex economic ideas clear, The Myth of the Rational Market is essential for understanding American economics, investment, and business in the twenty-first century.

“An intellectual tour-de-force...” - The Economist

“A fascinating historical narrative.” - Roger Lowenstein, The Washington Post

“Impressively broad and richly researched.” - Financial Times

“An engaging history...” - Joe Nocera, New York Times

“...a rich history of the world’s most seductive investing idea...the book chronicles the rise of rational market theory over the decades and captures the sizzle and pop of the intellectual debate ...” - Bloomberg

“Good wonky fun.” - Barry Ritholz, The Big Picture blog

“A valuable and highly readable history of risk and reward.” - Burton Malkiel, Wall Street Journal

“Fox’s explanations of technical material are superbly accurate and readable... Clearly the result of many years of research and reading,... it is a model of what the popularization of social science can be, but too rarely is, and it will continue to be read when the current crisis is many years behind us.” - American Scientist

“Do we really need yet another book about the financial crisis? Yes, we do — because this one is different. Fox’s book is not an idle exercise in intellectual history, which makes it a must-read for anyone who wants to understand the mess we’re in.” - Paul Krugman, New York Times Book Review

“Superbly accurate and readable... Clearly the result of many years of research and reading,... it is a model of what the popularization of social science can be, but too rarely is, and it will continue to be read when the current crisis is many years behind us.” - American Scientist

“A tough, tasty steak of a book.” - Dan Neil, Los Angeles Times

“A thoughtful, often fascinating, always illuminating history of the idea of market rationality.” - Cory Doctorow, boingboing.net

“This wise and witty book is must reading for anyone who wonders what makes financial markets tick. Even those who have wrestled with this question for years will be glad to have read Fox’s compelling history.” - Peter Bernstein, author of Against the Gods: The Remarkable Story of Risk

“Justin Fox is a truly insightful fellow who can see things with his own eyes—a rare, very rare attribute.” - Nassim Nicholas Taleb, author of The Black Swan

“His analysis is singularly compelling, and the rare business history that reads like a thriller... A must-read for anyone interested in the markets, our economy or government, this dense but spellbinding work brings modern finance and economics to life.” - Publishers Weekly (starred review)

“A lucid, lively and learned account.” - Barron's

“Fox makes business history thrilling.” - St. Louis Post-Dispatch