Asia Times: Free markets are not rational

[marmar]

SPEAKING FREELY
Free markets are not rational
By Aetius Romulous

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.


The markets are rational. From that inviolate truth, a pillar of economic thought for 233 years, flows all else economics understands about markets, men, and money - an unalterable belief that markets can be measured, quantified, cut and pasted in mute acceptance that under it all lies the consistent and undeniable force of rational behavior, a religion gone unquestioned.

The theory of rational markets - that buyers and sellers will always act in their best interests - was given life by Adam Smith in his Wealth of Nations in 1776. The new study of economics, born into a moment between ages, grew and developed with its gospel already written and sanctified. Economics became nothing more than competing studies that tried to squeeze the maximum utility out of the blandness of rational, human behavior. The competition reached a turning point at the end of two brutal wars and an economic depression that sent buildings full of newly minted economists running for their slide rules.

The rational behavior of man had succeeded in removing more than 160 million rational men, women, and children of free will from the market, and with the dull precision of 100 million mallets, rationally pummeled the earth to pieces in its own best interest. Regardless, it still came to pass that "rational", as they say, was written by the victors, and so from the smoke and ruin of trial by fire came the forged steel sword of the American Way, embracing its own best interests by clinging to the myth as flag, an inviolate symbol of the good, the bad and the ugly.

Patriotism - an exceptionally irrational behavior - became welded to the economic cause. Free markets are rational. One choice, two options - we are right, or they are wrong. Walking off the battlefields of Europe and into the womb of America at Bretton Woods, no one questioned the unconscious absolute that free markets are rational, blinded as they were by the sheer joy of having lived to tell. And again, the participants of Bretton Woods, having given birth to the World Bank and the International Monetary Fun and who built the world we thrash around in today were doing so in a single moment of time, between two very different ages. .........(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/KC20Dj04.html

[leftstreet]

1. Some excellent stuff in that piece!

For after all, we live in a new age of individuals now, connected by the Internet, thrust apart and together by technology. Democracy has arrived to the people of the earth, freed of national boundaries by the World Wide Web. Humans are now at odds with economics, and classically trained economists are as relevant as the steam engine. Regression to the mean does not apply to bell curves of one.

There will be a fight to be sure. In America, there is no question but to do what it takes to get everything back to the past as fast as possible. Americans want to reset the machine and keep on playing. The rest of the world - who trusted their blood and treasure with the world's only superpower - feel differently about things. It wasn't them who killed the golden goose, but they were paying for the crime. A new global era was taking shape while Americans dithered over politics, Barack Obama's election being the last America would make without the input of the world.

Massive amounts of invisible capital poured across fibre optics, filling computer screens with uncountable digits impossible for coke-addled humans to imagine or fathom. Nothing less than a computer game ensued, using the invisible capital of the imaginary American Dream - leveraged beyond any common sense - in an online team shooter played in a private and expensive forum. All holy hell was unleashed with a few casual mouse clicks over coffee, by a single person seeking to maximize his utility, without a care or thought for what the result might eventually be.

Lots more.
Thanks for posting!
:thumbsup:

[Hello_Kitty]

2. Exactly what I've been thinking. Put far more eloquently, of course.

I've spent the past several days musing over how in the hell it came to be that the "free market" became the religion to trump all other faiths. When you have to use something like an "invisible hand" to explain how something works, what you have is a superstition and not a valid theory based in reality or evidence.