Needed: a new economic paradigm

The blame game continues over who is responsible for the worst recession since the Great Depression – the financiers who did such a bad job of managing risk or the regulators who failed to stop them. But the economics profession bears more than a little culpability. It provided the models that gave comfort to regulators that markets could be self-regulated; that they were efficient and self-correcting. The efficient markets hypothesis – the notion that market prices fully revealed all the relevant information – ruled the day. Today, not only is our economy in a shambles but so too is the economic paradigm that predominated in the years before the crisis – or at least it should be.

Markets ARE more efficient than central planning, but when the government meddles in them, it's foolish to think they won't respond. When you subsidize some good, you run the risk of creating a bubble, because rising prices lead to speculation. How hard can that be to figure out?