As regular readers know, we’ve been very critical of the behavioural economics crowd for applying a double standard that notices defects in markets but assumes away such defects in government. It’s often like they’ve replaced the imaginary Homo Economus with an even more far fetched Homo Publicservantus.
As it turns out, this critique doesn’t apply to Time Magazine’s Justin Fox, the author of the recent book The Myth of Rational Markets. In a recent column at Talking Points Memo, Fox explains:
Now that this financialized economy has proved to be extremely fragile, we’re due for an extended period of rethinking–of financial economics, of regulation, of taxes, of how we think about economic growth (clearly, growth fuelled purely by rising asset prices isn’t such a great thing). I’m of the opinion that it’s not as simple as, say, putting the regulators back in charge, given that there’s no reason to think financial regulators are more likely to be rational and right than financial markets are. But clearly we can do better.
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