Business Cycles and Equilibrium

An updated look at what Fischer Black's ideas on business cycles
and equilibrium mean today

Throughout his career, Fischer Black described a view of
business fluctuations based on the idea that a well-developed
economy will be continually in equilibrium. In the essays that
constitute this book, which is one of only two books Black ever
wrote, he explores this idea thoroughly and reaches some surprising
conclusions.

With the newfound popularity of quantitative finance and risk
management, the work of Fischer Black has garnered much attention.
Business Cycles and Equilibrium-with its theory that
economic and financial markets are in a continual equilibrium-is
one of his books that still rings true today, given the current
economic crisis. This Updated Edition clearly presents
Black's classic theory on business cycles and the concept of
equilibrium, and contains a new introduction by the person who
knows Black best: Perry Mehrling, author of Fischer Black and
the Revolutionary Idea of Finance (Wiley). Mehrling goes inside
Black's life to uncover what was occurring during the time Black
wrote Business Cycles and Equilibrium, while also shedding
light on what Black would make of today's financial and economic
meltdown and how he would best advise to move forward.

The essays within this book reach some interesting conclusions
concerning the role of equilibrium in a developed economy

• Warns about the use and abuse of modeling

• Explains the risky business of risk in a straightforward and
  accessible style

• Contains chapters dedicated to "the effects of uncontrolled
  banking," "the trouble with econometric models," and "the effects
  of noise on investing"

• Includes commentary on Black's life and work at the time
  Business Cycles and Equilibrium was written as well as
  insight as to what Black would make of the current financial
  meltdown

Engaging and informative, the Updated Edition of
Business Cycles and Equilibrium will give you a better
understanding of what is really going on during these uncertain and
volatile financial times.

Auteur

FISCHER BLACK is regarded as one of the great innovators of modern finance theory. He is most famous for cofounding the legendary Black-Scholes equation, although he contributed much more to finance in the areas of portfolio insurance, commodity futures pricing, bond swaps, interest rate futures, and global asset allocation models. Black worked at the University of Chicago and the MIT Sloan School of Management, as well as Goldman Sachs. He received his PhD in applied mathematics from Harvard University. Black died in 1995, two years before the Nobel Prize was awarded to Myron Scholes and Robert C. Merton for their work on option pricing. Since the Nobel Prize is not given posthumously, Black was given a prominent mention for the key role he played in developing the equation.

Résumé
An updated look at what Fischer Black's ideas on business cycles and equilibrium mean today Throughout his career, Fischer Black described a view of business fluctuations based on the idea that a well-developed economy will be continually in equilibrium. In the essays that constitute this book, which is one of only two books Black ever wrote, he explores this idea thoroughly and reaches some surprising conclusions.

With the newfound popularity of quantitative finance and risk management, the work of Fischer Black has garnered much attention. Business Cycles and Equilibrium-with its theory that economic and financial markets are in a continual equilibrium-is one of his books that still rings true today, given the current economic crisis. This Updated Edition clearly presents Black's classic theory on business cycles and the concept of equilibrium, and contains a new introduction by the person who knows Black best: Perry Mehrling, author of Fischer Black and the Revolutionary Idea of Finance (Wiley). Mehrling goes inside Black's life to uncover what was occurring during the time Black wrote Business Cycles and Equilibrium, while also shedding light on what Black would make of today's financial and economic meltdown and how he would best advise to move forward.

The essays within this book reach some interesting conclusions concerning the role of equilibrium in a developed economy

• Warns about the use and abuse of modeling
• Explains the risky business of risk in a straightforward and accessible style
• Contains chapters dedicated to "the effects of uncontrolled banking," "the trouble with econometric models," and "the effects of noise on investing"
• Includes commentary on Black's life and work at the time Business Cycles and Equilibrium was written as well as insight as to what Black would make of the current financial meltdown
  Engaging and informative, the Updated Edition of Business Cycles and Equilibrium will give you a better understanding of what is really going on during these uncertain and volatile financial times.

Contenu

Foreword v

Introduction xxi

Chapter 1: Banking and Interest Rates in a World Without Money: The Effects of Uncontrolled Banking 1

Chapter 2: Active and Passive Monetary Policy in a Neoclassical Model 23

Chapter 3: Rational Economic Behavior and the Balance of Payments 43

Chapter 4: Uniqueness of the Price Level in Monetary Growth Models with Rational Expectations 65

Chapter 5: Purchasing Power Parity in an Equilibrium Model 81

Chapter 6: Ups and Downs in Human Capital and Business 85

Chapter 7: How Passive Monetary Policy Might Work 91

Chapter 8: What a Non-Monetarist Thinks 99

Chapter 9: Global Monetarism in a World of National Currencies 107

Chapter 10: The ABCs of Business Cycles 117

Chapter 11: A Gold Standard with Double Feedback and Near Zero Reserves 129

Chapter 12: The Trouble with Econometric Models 135

Chapter 13: General Equilibrium and Business Cycles 153

Chapter 14: Noise 169

Index 191