There is much discussion about the impact of bubbles in financial markets and the policy challenges they create. This discourse is too often premised on informal and impressionistic notions of what constitutes a bubble. Jose A. Scheinkman's monograph pushes us to think more formally by providing an excellent discussion of explicit models of bubbles and their ramifications. This fascinating treatise is highly recommended. Readers will come away with a richer understanding of how some intriguing behavior in financial markets can be modeled in insightful ways. Moreover, they will better appreciate implications of these models for empirical evidence and policy guidance. -- Lars Peter Hansen, University of Chicago, winner of the Nobel Prize for Economics Jose A. Scheinkman has been at the forefront of financial economics for twenty-five years. This book introduces readers to his pioneering work: understanding how the rational and semirational collide in financial bubbles. It is elegantly written, insightful, fascinating-proof that the dismal science is moving toward a richer understanding of real markets, even at their most exuberant. -- Edward L. Glaeser, Harvard University, author of Triumph of the City This is a gem of a book on a topic of huge importance. Jose A. Scheinkman weaves through the logic of speculative bubbles, illustrating his arguments with clarity and precision yet always grounded in the institutions that form the backdrop for the financial system. It is the work of a masterful economist at the top of his game and should be read by anyone with an interest in connecting recent events to the timeless themes that feature in the history of the financial cycle. -- Hyun Song Shin, Princeton University Jose A. Scheinkman creates a fascinating model of bubbles fueled by differences in traders' beliefs. His analysis of traders' incentives to increase supplies in response to bubbles is full of implications about when to regulate derivatives and when to stand aside. Scheinkman's book is a masterpiece of theory and policy analysis, a fitting tribute to Kenneth J. Arrow. -- Thomas J. Sargent, New York University, winner of the Nobel Prize for Economics Investment professionals... might be intrigued by, if not convinced of, the regular pattern of [ speculative trading] bubbles as presented in this short volume ... [ these] discussions - involving Scheinkman and the eminent academics Kenneth Arrow, Patrick Bolton, Sanford Grossman, and Joseph Stiglitz - are worth the price of the book. Financial Analysts Journal
