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View Diary: Academia Knows Which Way the Learned Lean (21 comments)

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  •  prices are never wrong unless they're fixed (2+ / 0-)
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    annieli, slipper
    Being heavy in academia doesn't always work out correctly though, since it can put you into a bubble.  Ben Bernanke is a great example.  He thought the insane skyrocketing of housing prices was a good thing, because his textbook didn't predict a crash.
    Right-wing economists cannot conceive of market failure since by definition the market is infallible.  It's an axiom for them; the functional equivalent of "God exists" in theology - the singular premise upon which all the rest of the inverted pyramid of economics is built.

    In their minds, bubbles aren't "bad" because of course people are going to put their money where it can make the most money; it would be absurd for them to do otherwise.  It's Warren Buffet who's the lazy, crazy one in their world: chasing guaranteed returns like a welfare mooch (and like them doing better than he deserves) rather than engineering his own opportunities - Enron or Abacus-style - like a proper Master of the Universe.  In the market fundamentalist worldivew, prices are only "wrong" when they're set by some entity: i.e. government - rent control artificially underprices Manhattan apartments and no-bid cost-plus contracts artificially overprice Halliburton's services, both in the service of political goals.

    Economists are reversing cause and effect and arguing that assets aren't overpriced until people stop putting more money into them, not that people stop spending because they woke up on the wrong side of the bed and felt the asset is overpriced.  It's incumbent upon "smart money" to be "sophisticated" and proactive and recognize when to get out to preserve their inflationary gains before the "dumb money" herd reactively bails out en masse.

    Domestic politics is the continuation of civil war by other means.

    by Visceral on Sun Oct 13, 2013 at 10:39:30 AM PDT

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