So, I realized that I didn’t include a pontentially useful tidbit in my previous post. This has to do with recognition of market failures, such as those which result from incomplete information. Neoclassical economists–at least, the serious ones—acknowledge that markets do have failures, but they tend to believe that markets will tend to sort themselves and that rational decisionmaking will dominate irrational decisionmaking. Unfortunately, there is no good evidence that this is the case, making it another belief. I don’t think anyone would claim that the present crisis is the result of rationality, or that the S&L crisis, particular sub-crises of the Asian financial crisis of 1997-1998 (Hong Kong in particular)…I could keep listing them, but I think the point is evident.
Of course, government is more than capable of failure, as it is another collection of people just like a market. Just to pre-empt people, I certainly do not advocate a centralized, dirigiste economy. Rather, I’m looking for reasonable controls to protect people from our collective ability to be completely irrational…
