Three Expensive Milliseconds

You may object that this can’t be right, that the invisible hand of the market ensures that private returns and social returns coincide. Economists have, however, known for a long time that when it comes to speculation, that proposition just isn’t true.

… [and now for the kicker, the following statement is one in which Krugman pretty much distills Krugman down to a single sentence …]

It’s the whole financial industry, not just [fill-in-the-blank-with-a-specific-but-egregious-]piece, that’s undermining our economy and our society.

The Moral Power of Curiosity

One lesson of this tale is that capitalism doesn’t really work when it relies on the profit motive alone. If everybody is just chasing material self-interest, the invisible hand won’t lead to well-functioning markets. It will just lead to arrangements in which market insiders take advantage of everybody else.

Third, if market-rigging is defeated, it won’t be by government regulators. It will be through a market innovation in which a good exchange replaces bad exchanges, designed by those who fundamentally understood the old system.

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