19th Century Ideas -

Einstein said, “Make everything as simple as possible, but not too simple.” The problem with traditional economics is that it has made things too simple and then compounded the error by treating the oversimplification as gospel. The bedrock assumption of traditional economic theory and conventional economic wisdom is that markets are perfectly efficient and therefore self-correcting. This “efficient market hypothesis,” born of the machineage obsession with the physics of perfect mechanisms, is hard to square with intuition and reality—harder for laypeople than for economic experts. And yet, like a dead hand on the wheel, the efficient market hypothesis still drives everything in economic policymaking.