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The Crash of 2008 and What It Means: The New Paradigm for Financial Markets, by George Soros. New York, NY: Public Affairs, 2009. 258pp. $14.95 paper. ISBN: 9781586486990.
A number of books have come out regarding the current global economic crisis, ranging from academic studies to journalistic accounts. George Soros' book The Crash of 2008 and What It Means sits between the two: part academic theorization of how markets operate, and part prediction and policy prescription for investors and governments. Much of the contents have been laid out before, in his earlier writings, but here they are elaborated in fuller detail and applied in an analysis of the 2008 crisis of global financial markets. The goal of Soros' analysis is to provide an alternative approach to the conventional economic theories about financial markets, ones which hitherto have been hard-pressed to explain financial crises, particularly market bubbles. What he offers, in short, is his theory of reflexivity which proposes that markets have far less "rationality" and predictability because of the collective influence of the cognition and individual characteristics of market actors on market operation.
The book is organized into three sections. In the first, he discusses his theoretical approach to understanding financial markets and their actors, drawing on both philosophy and psychology to outline his theory of reflexivity. In the second section, Soros elaborates on a second theory of financial bubbles, (2008 he refers to as a "super bubble") and then applies his theory of reflexivity to the crash of 2008. The second section ends with a discussion of his economic forecast and policy recommendations....