Insanity of Markets

After the crazy week we just had, I wonder the same thing as this person in his op-ed in the NY Times. Despite the genius of the market it does lose its equilberium sometimes. Like it did this week. So where does the fault lie -- with the markets or the government? And there are many opinions on both sides -- here is one defending the market -- which makes it hard to know the answer.

I have some ideas. The problem with markets is very simple: people are involved. Markets are by intent impersonal, set up to allow actors to pusue their own self-interest. People are smart and ingenious and will try to outsmart the market [way oversimplified here because the market is more than just . Amazingly, the market is quite resilient but sometimes gets too far out of whack. Those in charge of regulating these markets (people, again) try to get it out of whack. These regulators "acting for the people" are trying to balance competing goods. These goods are inevitably political and ideological.

Often these prescriptions are counterproductive to the market or the market is counter to them. For example, a strong belief in equity (sometimes called justice) leads to government action that mitigates inquitable market effects. An impersonal market will always be inequitable from the perspective of certain actors at certain times.

I suspect people are distrusting the market right now -- trillions of dollars of stock value have vaporized, much of it retirement money. The question is will we move towards more government control and intervention? Fortunately, I have a lot of colleagues here in the Helzberg School who can help me understand finacial system that is so out of whack (and affecting everything else) right now.