Free Market and sound money hater, Matthew O'Brien, writes in The Atlantic:
Markets aren't completely rational because humans aren't close to completely rational.Yes, O'Brien is referencing the same Larry Summers who blew up Harvard's endowment fund with his reckless bet on interest rates, and who most recently had his name in the hat for the "job" of Counterfeiting Master of The Universe.
Not to be rude, but there are idiots. Look around. (Discreetly). That's how Larry Summers famously put it — minus any concern for social niceties — in a paper about why markets aren't really rational. It's the stupid, stupid.
Tweeter's stock symbol is identical to the one Twitter will use, just with an "Inc." added on. That's been enough for investors eager to get in on Twitter's forthcoming IPO to bid up Tweeter's thinly-traded stock as much as 1,000 percent on Friday. [...]
Look, everybody does stupid things. Sometimes people push up a semiconductor company's stock over 800 percent, because Psy's father (yes, "Gangnam Style" Psy) founded it. [...]
To err is human — which is why markets aren't divine.Now, all of this is true. People make mistakes and often do stupid things. But there is no better mechanism than the free market for such errors to occur within.
If people make a trading or investing mistake, like one of those named above, it's their mistake should they end up losing money. They suffer the consequences, and perhaps will learn from it. I, myself, come from a trading background, and some of my biggest advancements came from the stupid mistakes that I made. I wouldn't trade them for the world.
In a free market, the mistakes and consequences are isolated, and over time the price of the asset corrects. No need to talk about divinity. Efficiency in removing the mistakes is where the free market thrives. It is the ultimate regulator.
This is not the world that O'Brien comes from. Read him long enough and you'll recognize that the "divinity" jab is inserted in his piece to discredit the market. In his world, human individuals (who are praised as if they are divine) must forcefully intervene in the marketplace with their imperfect knowledge about how the world works.
O'Brien, and the legion of Keynesians like him, base their careers on attempting to jam a square peg into a round hole. In other words, they try to take economics, which is a deductive science, and turn it into an empirical science like biology or physics.
They'll jam so many models and data down your throat, and it's all for naught. Not that there's anything wrong with data; it actually can be quite valuable. Entrepreneurs live and die by data. The problem with the Keynesians is what they seek to do with the data. They take it and pontificate how government force should be administered.
While the free market isolates the stupidity of people, the meddlers expand it so that just about everyone suffers. (I say "just about everyone" because there are individuals who understand and can detect the consequences of government's stupid actions and profit from that knowledge. But the government-educated masses do not understand and are constantly taken to the cleaners).
While the free market provides learning experiences for those who make mistakes, there's no chance of the meddlers correcting mistakes because it would mean voluntarily removing themselves from the marketplace. Furthermore, in their eyes, it's never their mistake. It was a problem with their "models". The "inflation target" was "too low". The "bailout" should have been bigger. It was the drought's fault, or the hurricane's fault...etc...etc...etc.
And finally, while a free market swiftly corrects errors, the meddlers only make them worse. A loser business fails? Bail it out!...A government agency fails? Increase its budget!....One war after another fails? Invade another country!!...Multiple QE's fail?....Implement QE Infinity and use "extraordinary" monetary tools!
While the marketplace attempts to correct the mistakes of the Masters of The Universe, they rabidly continue to fight it tooth and nail.
Eventually the market wins. It can't be beat.
But in the meantime, we have to watch (and live through) this bizarre spectacle of one bad idea chasing after another into the abyss.
Good ideas are always there, ready for the taking. Unfortunately the ideas of O'Brien and the Keynesians have to completely run out of steam first, before the public will (possibly) be ready to embrace them.
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