Nov 13 2007
What Drives Markets? Exuberance? Capitalism? Bad policy?
Are manias the byproduct of irrational exuberance, as Yale prof, Robert Shiller’s same titled book asserts? That’s an idea correctly refuted by one of my favorite economists, Frank Shostak, in a worthy article that discusses the real reasons behind why so many investors and entrepreneurs end up making the massive errors that Shiller wants to foff off on the “old animal” spirits theory. Give the good Doctor a read because he does a good job at pinning the cause of bubbles and their crashes where they firmly belong: on the price fixers for money and credit at the Federal Reserve and other central banks.
Coincidentally, I read a Gary North 50th Anniversary piece on Ayn Rand’s Atlas Shrugged, which dovetails nicely with Dr. Shostak’s observations. North rightfully criticizes Rand’s idealistic view of the capitalist, but not for the tired socialist reasons many of us who generally like Rand’s work usually hear.
Combine both pieces and you get an interesting clarity on the fundamental purpose and priorities of most entrepreneurial types, and how meddling on different fronts perverts the natural goodness preserved by the natural balance of free markets.
In that context, readers stand to learn a bit about why present policies pursued by governments and their central banks are on a collision course with economic gravity 101. Plan accordingly!
