As you can see, I’ve been doing a lot of thinking about politics and the country and such 🙂 This week,, as with most people, the economy has been something of a concern.
So I went back to my knowledge from my MBA student days (this time was rather short) and started thinking more about our free markets. I’ve come to two conclusions here (1) the efficient market hypothesis does not work and (2) trickle-down economic policies don’t work. Now you’re probably thinking – why should I listen to this guy, he’s a computer scientist, he doesn’t know anything about economics. Well if you look at what is happening in this country, I don’t think the economists know anything about the economy. I don’t think our financiers know anything about finance. etc…. make your own mad lib here.
Efficient markets require that information is accepted and processed rationally and efficiently . We have seen thinks like an old story cause United Airline’s stock to drop, and problems with a few (or more than a few) financial firms send other stocks plummeting. Maybe I just don’t know enough, but this seems like an inefficiency in the market. I am not convinced that unregulated and free markets simply don’t work. There must be provisions for transparency, minimization of concentration of risk, and transparency (yes – I meant to say that twice). By allowing concentration of risk, we have allowed companies to reap in profits (especially for their top executives) while we (the taxpayers) are left to shoulder the burden. Are we only capitalists when profits are high, and suddenly socialist when times get tough. Why shouldn’t we (the taxpayers) benefit since we are apparently on the hook for the risk? Better yet – prevent this from happening on a massive scale! Make the economy about goods and services again, rather than finance. We can’t all get rich by turning money into more money.
As for trickle-down economics. My theory here is that this theory supposes the absence of greed. As I understand this theory, give money to the rich and the employers (big companies) and the will buy products, hire people, create jobs…. etc. But what do people with money want to do – turn it into more money!!! This wealth is going into financial markets and it is not trickling down to the rest of the population. It is a lie that we have been telling ourselves since the 80s.
Reasonable regulation is a good thing – taxes are a good thing – not running a federal deficit is a good thing – preventing concentration of wealth (and risk) is a good thing. Extremes are a bad thing – in either direction.