That investors are abrogating their responsibilities to allocate capital intelligently is a danger from the rapid growth of passive fund management. Less widely aired, but of greater concern, is the threat posed to financial stability by the dominance of benchmark-tracking funds.
Excessive dependence on quantitative indicators has long caused trouble. Yet as Jerry Muller shows in “The Tyranny of Metrics”, a fixation with targets still distorts the behaviour of teachers, doctors and executives. Though data matters, it’s no substitute for judgment.
The People’s Republic has long defied the economic doom-mongers. In “China’s Great Wall of Debt”, Dinny McMahon exposes the fragility and contradictions of the country’s growth model. It’s a detailed and original reality check on the latest bout of China hype.