Nice article from… …New Zealand?
It’s well worth reading in its entirety.
It’s just as well Milton Friedman dropped dead when he did.
Famous for holding an extremely high opinion of himself, Friedman would’ve loathed witnessing his carefully burnished reputation as the 20th Century’s preeminent economist unravel as quickly as the world’s financial markets.
At the same time, the standing of his great rival, the British economist John Maynard Keynes, is being restored.
Hubris is punished, Keynesians would argue, and virtue rewarded.
Friedman, who died two years ago, and his acolytes at the Chicago School of economics proposed the “efficient markets” and “rational expectation” hypotheses.
It is these theories that provided the intellectual architecture upon which nearly three decades of financial de-regulation is based.
To grossly simplify, according to the Chicago theory, speculators sell when stock prices rise to unjustifiable heights; if prices drop too low they swoop in and buy, thus creating an efficient market.
The theory of rational expectation holds that a market reality exists in which all people possess group knowledge, form beliefs about economic indicators such as inflation and rationally act on that knowledge. [More]
Financial crisis proves myth of efficient markets
Nick Smith, Business Day New Zealand, October, 24 2008