>And I think it's not so very surprising that a laissez-faire type like Andrei
>Shleifer would come to the conclusion that a massive misallocation of capital
>by a free market was the fault of a few Very Bad People who Cheated
>and Must Be
>Prevented From Interfering In The Workings Of A Basically Fine Market
>Mechanism. Explaining that everything would have been fine except for a few
>bad apples is practically an industry in itself. It's the explanation of the
>phenomenon which allows him to preserve all of his beliefs about the
>efficiency
>of laissez-faire capital markets and most of the facts. Ask him whether the
>Crash of 1929 was the fault of Jesse Livermore and the Standard Oil crowd.
I'm with you on this. These asymmetric info folks just can't accept systematic manias, mass outbreaks of self-deception, as an explanation; if things go bad, it has to be because of some intransparency, not a delusional misallocation. In the midst of the dot.com madness, Joe Stiglitz asked, the picture of innocent perplexity, "Why do people buy these stocks?"
Doug