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40 of 45 people found the following review helpful:
4.0 out of 5 stars
How Wall Street became Main Street and what comes next..., October 6, 2004
Having read-or having attempted to read-a few of Mark C. Taylor's recent books, I was delighted to discover that this one, "Confidence Games" was both entirely different and more of the same. Where his always lucidly written, often provocative and sometimes esoteric reviews of contemporary science, art, architecture and fashion have often left me grasping for a conclusion, this book, "Confidence Games" delivers-BIG. If writing about the meaning of it all were a physical sport, I would hazard that this fleet-footed journey from the birth of money to the terrorist attacks on the World Trade Center is Taylor's marathon: a long, fast ride that covers as much ground as an old school Hollywood epic without the tin-eared dialogue. Throughout, Taylor deftly summarizes insights from celebrated economic and cultural thinkers of the last several centuries without getting bogged down in the dense foliage of history, all the while reminding readers that what paths may look today like a straight line are almost always a zig zag. What can you expect to get from this book? For many, it will be a pithy introduction to the incredibly complex financial world we have inherited. Others will likely nod their head as Taylor provides intriguing evidence for the parallels and connections between high finance and high art, God and Mammon, computers and contemporary culture. Like the best music, this book finds a deep groove early on and smoothly segues from pleasant chords to surprising riffs, never missing a beat even as the drummer gets wicked. This is clearly not summer or beach reading. But, given the often-cited consensus that 9/11 changed everything, a book like "Confidence Games" gives readers an unabashedly pleasurable opportunity to struggle with the very complicated questions that define the world in which we have found ourselves. Taylor's tenacity in pursuing "the meaning of it all" through the lens of money and markets provides us with the rare opportunity to see the big picture in sharp focus. Disclosure: Over a decade ago, I was a student of Mr. Taylor's and continue to correspond with the author on current affairs.
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16 of 16 people found the following review helpful:
4.0 out of 5 stars
Money & Markets from Diverse Perspectives, April 6, 2005
What gives money its value? Are financial markets truly linked to the "real" world? Professor Mark Taylor, who has been praised as an "awe-inspiring theorist of everything," explores these and related issues in this interdisciplinary book. Taylor attempts to show the links between economics, financial markets, money, postmodernism, complexity theory, media, art and religion. It's quite an audacious task, and although one might debate if he was successful, Taylor takes the reader on a thrilling intellectual journey. Taylor claims you can't study markets in isolation. Markets are embedded in society, so to fully understand them you must understand politics, culture, science, religion, sociology, and psychology. To do so, Taylor takes us on a tour of not only various academic fields, but also of places from Las Vegas to Times Square. Stops on this tour support his thesis, which is that money and markets are essentially artful confidence games. For example, he notes that in the 1987 movie "Wall Street," the character Gordon Gekko says "Money...is transferred from one perception to another." Taylor then recounts how Wall Street fueled the public's perceptions of Internet stocks during the late 1990s stock bubble. Financial journalists, stock analysts, traders, advisors, and company officials all promoted fledgling Internet companies with skyrocketing stock prices. Ambitious teenagers talked up the price of small stocks in Internet bulletin boards and then sold them at a profit. The NASDAQ market opened a glitzy new TV studio for business reports in the media saturated & neon-lit Times Square. Using these examples, Taylor makes the point that the financial markets and the media are clearly intertwined, and that just some misplaced trust in them can bring financial markets through a boom & bust cycle. Taylor also discusses money and how it gets its value. Prior to 1971, the value of the US dollar was backed by gold held by the US Treasury. Generally, a gold standard prevents governments from arbitrarily running the presses to pay debts, which reduces the threat of inflation & boosts investor confidence. But what backs the value of gold? In short, only our collective confidence in it. Gold's value is not intrinsic to the metal; it's purely mental, and based on communal faith and trust. Because of that, going off the gold standard was difficult mental and emotional step for some in 1971. Taylor also discusses the sociologist Georg Simmel and his work on the philosophy of money. Simmel's view was that economic exchanges are a form of social interaction, albeit interactions that are turned into quantitative, rational, impersonal ones. He thought that the flow of money shows the relationships between people. Thus, money derives its value from to what one can exchange for it in these social interactions, and its value is just socially constructed. Taylor goes on to discuss multiple views of the economy. He cites Friedrich Hayek's view that the economy is a vast, distributed, complex information processing system, in which prices are used as signals to coordinate peoples' actions. He also discusses modern complexity theory, which views the economy as a dynamic, complex, adaptive system, with self-organized emergent group behavior that transcends any individual person. In both these views, the economic "invisible hand" guides peoples' actions worldwide, and is seemingly omnipresent and omnipotent. This description, Taylor poignantly notes, is very similar to descriptions of God; in fact, Adam Smith's original view of the "invisible hand" was influenced by Calvinism and had God in mind. Thus, God is not dead as some have claimed; he has simply been reborn as the market. These are just a sampling of topics discussed. Overall, I thought the book had many thought-provoking ideas (& a few bad ones, honestly). It was rich in detail and well researched. But also I thought it could have been structured better to bring out the main points - it was easy to lose the main points amongst the thicket of details about Babbage, Bauhaus and the bond market. Nevertheless, I thought the good outweighed the bad, so I'd recommend it to anyone who is interested in viewing financial markets and the economy from a new perspective, that of a humanities professor and cultural critic.
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8 of 8 people found the following review helpful:
4.0 out of 5 stars
Profound Questions raised in Confidence Games by Mark Taylor, July 26, 2008
This review is from: Confidence Games: Money and Markets in a World without Redemption (Religion and Postmodernism) (Paperback)
I am always skeptical of books that try to integrate trends in economics and finance with other disciplines because they tend to be written by experts from the other disciplines with only a facile understanding of economics and finance. The result is that they simply appropriate simplistically and selectively from the complex history of economic events to serve their argument. I was pleased, therefore, to discover right from the introduction of this book that Taylor has made some important and even profound observations on the human condition and its direction in the beginning of the 21st Century. Nonetheless, the book contains significant flaws that, upon reflection, seem unnecessary. Taylor's central argument does not depend on the errors in fact and interpretation that he makes throughout the body of the book. Taylor is a professor of religion with a deep understanding of philosophy, art history and, naturally, religion. In the mid-1990s he formed an internet-based education company, and in that process developed some real-world experience of modern financial markets. He augments his experience with some thorough study of modern finance and economics, though as becomes clear in the later chapters of the book, finance remains his weakest subject. Taylor observes that the rapid growth of interconnection throughout the world creates evolving networks that grow in complexity exponentially and unpredictably. In my view, this is the most defining characteristic of our age - not simply because increased complexity makes the world more difficult to understand, predict and navigate, but because the complexity frightens and confuses people, giving rise to fundamentalist movements throughout the world (and George W.'s presidency) as people react against the complexity by trying to force simplistic models onto their world views. In Confidence Games, Taylor develops this point much more completely. Observing developments in religion, art, physics and economics, Taylor shows how unified or dualistic explanatory models fall short in practice because they never account for the feedback loop that occurs when the object influences the subject, or the effect influences the cause. A straightforward physical example occurs when physicists try to model more than two bodies in motion, only to discover that the reciprocal influences of each body on the others creates highly sensitive nonlinearities that become impossible to model precisely. More to the point of the book, theoretical models of market equilibrium and stock prices do not incorporate the feedback loop of investors influencing each other, which can create unpredictable valuations and extended periods well outside of reasonable ranges for rational valuation. A better explanation for systems with multiple interrelated participants comes from models of complex adaptive systems, generally used by biologists to understand the behavior of groups of organisms struggling to survive and responding to both endogenous and exogenous influences. This is a consistent theme throughout the book and argued convincingly. Taylor applies the complex adaptive system model to religion, art and economics to show how each of these disciplines have internally generated feedback loops that influence their respective developments, but also how each discipline influences the others, creating a model that allows us to better understand developments in each of the subjects than we would have by analyzing each independently. For me, this argument is the most enjoyable and profound part of the book. I learned that the concept of the "invisible hand" was first used by Calvin to describe how God influences human affairs. Also fascinating was the drawn out parallels between "value" as it comes to us from either God or money. Parallels between God and gold go back to the origins of money, and the abstraction of money from gold into paper and digital currency in the last century track questions about moral absolutes and the secularization of religion. Taylor observes that "Both religion and financial markets are, after all, confidence games." (p. 122). Otherwise said, the value is a function of the confidence we have in the whatever we are valuing, be it from a religious or economic framework. Within this argument Taylor raises the question if perhaps the financial markets and market value have supplanted God as the true arbiter of value in modern times. According to market purists and the Efficient Market Hypothesis, markets are omniscient and by their very nature judge the value of almost everything, directly or indirectly. Taylor convincingly shows how art cannot escape market valuation and in modern times, no longer tries to distinguish itself from commercial products. Later in the book Taylor dismisses this question by arguing that market values are rarely in equilibrium, and thus are not omniscient. However, I think this is a subject that could be carried forward profitably (no pun intended). The massive commercialization of the world, abetted by globalization and the complex networks described in the book, in my view stands in stark contrast to the ambivalent relationship that religion has generally had with money. Until modern history, "value" as it is broadly understood when applied to people or ideas, was primarily the domain of religion. Insular and largely homogeneous societies had relatively static distributions of wealth with the aristocracy seeking to justify their prestige in religious terms. Modern societies, in contrast, are much more heterogeneous and have more dynamic allocations of wealth. Confronted with alternative religious views with differing value judgments, financial value among many societies becomes the universal arbiter of value without, or at least with less, dependence on religious or moral affirmation. In many cases the traditional relationship between money and religion is inverted as evidenced by the rise of mega churches that lead their congregants to believe that their church will help them to become financially successful. For these churches, the value of their religion becomes dependent on financial values whereas the reverse was true historically (think about the divine rights of kings!). And if financial value is perceived to be the primary universal arbiter of value, hasn't money replaced God as he-she-it was traditionally understood? I sensed while reading Confidence Games that Taylor saw his argument progressing in this direction, and stepped away from it. If so, that could explain the otherwise disappointing weaknesses in the body of the book. First, the book was clearly written for an audience knowledgeable in philosophy, religion and art, but with a sketchy understanding of finance and economics - which is not surprising as this was clearly Taylor's starting point when he stepped into the world of finance in the 1990s. Consequently, much of the body of the book is a primer on theories of modern finance, valuation, the loss of the gold standard, the relative values of currencies, the growth of securities markets, derivative markets, and computer driven trading. While I was impressed by the accuracy of Taylor's factual descriptions of these developments, his interpretation of them revealed the shallowness of his understanding. In contrast to his descriptions of the developments in religion and art where he was fully equipped to step back and observe the changes dispassionately and with a long-term view, when Taylor observed recent developments in finance his view was generally politically biased or simply demonstrated an incomplete understanding of the subject. For example, throughout his discussion of finance he creates an artificial distinction between real value and "spectral" value to differentiate between real value and value that has no foundation. While I wouldn't dispute his point that market valuations can rise irrationally, trying to draw a subjective line at a fair valuation independent of the market is impossible. For Taylor, it appears that any increase in market values since Volker shifted to a monetarist policy in 1979 is spectral in a pejorative sense, which is absurd. What's more, is the value of a machine or agriculture fundamentally different than the value of a service or information? Can't the valuation of both hard and digital assets rise and fall irrationally? It is a strange position for someone who has made a career as an academic and ultimately profited by selling his knowledge and teaching skills through an internet company. Does he think that his "product" is inferior to the produce he buys at the grocery store? His position makes little sense. Taylor is clearly uncomfortable with the deregulation trend that began in the 1970s and argues that the increase in volatility and financial turbulence is a function of this deregulation. However, he never clearly links the deregulation to the financial crisis, or, to the extent that the link is self-evident, never discusses the motivation for the policy change or the possible benefits that were derived. Sometimes, he simply doesn't understand the facts. For example, he writes: "The financial economy was roaring but the productive economy was sagging. When the economy entered recession in 1981-82, it became apparent that the very [Federal Reserve and deregulation] policies that were creating record profits in the banking industry were also sowing the seeds of a crisis that began with S&Ls and quickly spread throughout the entire system. In 1980, there were 4002 S&Ls; three years later, 962 had failed. Multiple factors contributed to this collapse. A drop in real estate values in the Southwest created problems for savings and loan associations, which had recently ventured into unfamiliar investment...
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