“If stability and efficiency required that there existed markets that extended infinitely far into the future — and these markets clearly did not exist — what assurance do we have of the stability and efficiency of the capitalist system?”

Autobiographical Essay (2001)

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Joseph E. Stiglitz39

American economist and professor, born 1943. 1943

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“The proposition that markets drive economic efficiency is central to much of economics. Adam Smith illustrated that the “invisible hand” of the market drives efficient allocation of resources in a system of division of labor. Friedrich Hayek illustrated the central importance of the price system as an information processing mechanism more powerful than any centrally planned system could ever be. Kenneth Arrow and Gerard Debreu illustrated that complete and perfect markets deliver a Pareto-efficient equilibrium, in which no one person can be made better off without making someone else worse off. And the development of the efficient- market and rational- expectations hypotheses suggested that financial markets are in fact efficient, and that the conditions required for efficiency and for rational and stable equilibria apply even in contracts between the present and the future, which financial markets provide.”

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“In the Treatise we are shown the bond-market as it exists in real life: a speculative market where a price, with an identity and a momentary stability, can only exist if there are two camps of dealers holding opposite views of the impending movement of bond prices.”

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“Even in financial markets, the concept of market efficiency does not hold.”

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“In the short-run, the market is a voting machine - reflecting a voter-registration test that requires only money, not intelligence or emotional stability - but in the long-run, the market is a weighing machine.”

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“Capitalist development requires, as a precondition, that the state foster a general sociopolitical and legal framework conducive to market relationships. An environment of security of property and predictability is basic to encourage investment; in turn, this requires political stability and a minimum degree of social harmony.”

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“If financial markets aren't efficient, then what are they? According to the 'fractal market hypothesis', they are highly unstable dynamic systems that generate stock prices which appear random, but behind which lie deterministic patterns.”

Steve Keen (1953) Australian economist

Source: Debunking Economics - The Naked Emperor Of The Social Sciences (2001), Chapter 11, Finance And Economic Breakdown, p. 243

“This new model of development would be based clearly on the goal of sustainable human well-being. It would use measures of progress that clearly acknowledge this goal. It would acknowledge the importance of ecological sustainability, social fairness, and real economic efficiency. Ecological sustainability implies recognizing that natural and social capital are not infinitely substitutable for built and human capital, and that real biophysical limits exist to the expansion of the market economy.”

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“So far as school education is concerned, many of the assumptions necessary for market efficiency fail, the main problems being imperfect information, imperfect capital markets, and external effects.”

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“Trusting souls who accept economic assurances that markets are efficient are unlikely to fare any better this time when the Bull gives way to the Bear.”

Steve Keen (1953) Australian economist

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“If stability and efficiency required that there existed markets that extended infinitely far into the future — and these markets clearly did not exist — what assurance do we have of the stability and efficiency of the capitalist system?”

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Joseph E. Stiglitz39

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