Nilesh Jasani's Reviews > Devil Take the Hindmost: A History of Financial Speculation

There have been numerous excellent books on financial market bubbles and busts. Such books excel in either explaining the factors that cause extreme price movements (behavioral and/or policy) or describing the vivid details of the frenzy on the ways up and down or proscribing policy steps to avoid their repeats. In fact, the best of them do all three well. This one does neither.

For most parts, the book reads like verbal descriptions of charts showing extreme price movements. The author cannot stay away from the word "speculators" for long without ever defining how he would separate these "devils" from other types of investors. One feels that the author is against any liquid securities, but he also abhors wild price swings in illiquid assets like art and real estate. There is no support for allocated capital decisions like in Japan, even when the author does not believe in capital allocations done by market forces.

Financial market manias exert enormous costs. Whether this price is bearable for the benefits markets generate is one debate. Still, smarter critics describe how one can reduce the extremes of bubbles in important securities, assets, or instruments without taking away most benefits. Many commentators also recognize that bubbles and busts are an inherent part of capitalism even if one finds a way to reduce liquidity in public markets (as seen in bubbles in private equity now or real estate since time immemorial). The solutions are primarily in policymakers finding the courage to stand against extreme market forces even at the chance of being wrong rather than allowing markets to be. For brave policymakers, the policy tools are not just monetary but more in tax and regulatory areas. Unfortunately, most policymakers refrain from going down these paths. In their absence, bubbles and busts will only become more frequent and extreme given the technology innovations leading to far better market access.