George Soros has written an interesting piece regarding the global financial crisis, the first section of which provides a nice, tight overview of what has happened. He goes on to argue that the prevailing economic theories of financial markets have been wrong for quite some time, before proposing the framework for a new premise on which to build the theory.
I am woefully under-qualified to critique his proposal, but it seems to be relatively sound and to take a much more moderate position than previous theory has.
He attacks market fundamentalism quite strongly as faulty, suggesting that the fundamentalists were deluding themselves. He points out something that has seemed so obvious to me from even a precursory understanding of economics that I have long been dismayed and bewildered that so many otherwise rational economists don’t seem to grasp its broad strokes – “Just because regulations and all other forms of governmental interventions have proven to be faulty, it does not follow that markets are perfect.”
Indeed it doesn’t take much to see that markets are often imperfect. Many, if not most, of the economics courses we can study during our degrees are centred around one form of market failure or another.
Admittedly, governments are rather poor at getting things done.
They’re far worse at getting things done well.
In a similar vein to the concerns Soros voices at the end of his piece, I worry that our governments will use this as a rationalisation to impose their own faulty, emotion-blinded ideological approaches to economic management. Though to much to hope for in anything but the most idealistic of fantasies, it would be nice to see a government that acts on the basis of solid data and research rather than the ideological views of its constituent lobbies, special interest groups, and political hacks.