The Myth Of the Rational Market »
Posted By Progressive 4 months, 3 weeks ago in Business & Finance
Irving Fisher lives on in American economic history mainly as a laughingstock. He was, after all, the ninny who declared on Oct. 15, 1929, that stock prices had reached "what looks like a permanently high plateau." Two weeks later, stocks plunged off that plateau--not to return to their 1929 level for a quarter-century.
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Progressive
There are only two kinds of people who are really fascinating: people who know absolutely everything, and people who know absolutely nothing. -- Oscar Wilde
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jimdoze4 months, 3 weeks ago
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"In the 1990s and 2000s, in fact, this myth of the rational market was embraced with a fervor that even Irving Fisher never mustered. Financial markets knew best, the thinking went. They spread risk. They gathered and dispersed information. They regulated global economic affairs with a swiftness and decisiveness that governments couldn't match. And then, as debt markets began to freeze up in 2007, suddenly markets didn't do any of these things."
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Markets are still far better at these things than a single individual or even a sizable group of them, such as an elected congress or a Congress of People's Deputies.
I would posit that government tinkering with markets over the long term is more a cause of our current problems than some form of "inherent flaw" in markets in general.
http://www.propeller.com/story/2009/06/17/thanks-f...-
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hyperbola4 months, 3 weeks ago
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Actually we should never let the "free marketeers" forget that already Adam Smith stated that free markets don't exist and uncontrolled markets are ALWAYS used by monopolists and crooks to defraud other people.
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As for your "posit", after repeated failures (about every five years) ever since Reagan started the pilfering by the super-rich (1987 market crash, junk bonds, S scam, .......), your statement is more "faith-based" than based on rationality or experience.
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capecoralMComment removed: Retracted by user4 Replies
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beavith14 months, 3 weeks ago
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this guy has a remarkable level of insight for 20/20 hindsight.
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he's got a thesis and he's running with it.
i'd rather count on the markets than on the gov't. Freidman is more right than this guy.
i'm with Jim and CapeCoral. this was brought on by the gov't.-
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hyperbola4 months, 3 weeks ago
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The government forced "investment bankers" to create hundreds of trillions of dollars worth (several times the world's total GOP) of shady financial products like derivatives?
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You have to be awfully far into sect-like behavior to believe that.
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Progressive4 months, 3 weeks ago
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FTA:
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Shiller warned repeatedly of irrational exuberance in stocks in the late 1990s and in housing in the early 2000s. He was largely ignored both times--until he turned out to be right. Unwillingness to countenance the possibility that market prices might be wildly wrong defined the behavior of regulators, corporate executives and most Wall Streeters during both the tech-stock and real estate bubbles.-
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hyperbola4 months, 3 weeks ago
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Actually there are very good economic studies dating back as much as 30 years that analyze the performance of "anglo-saxon" market practices over the last 200 years (pretty much since the modern form started). Throughout this time the "bankers" have repeatedly gambled, failed and expected the public purse to bail them out.
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In short, the risk of market failure is systematically underestimated in "anglo-saxon" practices (which is why more sane systems in other parts of the world complain about our shady dealings) and government corruption has almost always been used to pay off the crooks. We should start taxing many types of financial transactions as a way of ending reckless speculation.
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rally-monkeyComment removed: Abusive3 Replies
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