The efficient-markets hypothesis simultaneously justifies state failure and enabled the financial crisis

Evidence

Here we find the first intimate point of connection with the narrative of the global crisis. From this perspective, prices in an efficient market “contain all relevant information” and therefore cannot be predicted by mere mortals. In this version, the market always surpasses the state’s ability to process information, and this constitutes the kernel of the argument for the necessary failure of socialism. All attempts to outguess the market, even in the midst of crisis free fall, must fail. But far from a purely negative doctrine, another related version of the efficient-markets hypothesis underwrote much of the theories and algorithms that were the framework of the baroque financial instruments and practices which resulted in the crisis in the first place. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 150

Categorization

• XREF: Connects the reader’s familiarity with Mirowski’s broader argument and with how efficient-markets theory was weaponized — relates to the reader’s work on how orthodoxy survived 2008. — connects to: The efficient markets hypothesis is politically prescriptive, declaring markets the only legitimate organizing principle — Mark Blyth, Austerity: The History of a Dangerous…, 128; Efficient market theory could not imagine internally-generated systemic crisis — Mark Blyth, Austerity: The History of a Dangerous…, 130; The financial system failed to foresee crisis because its risk theory denied catastrophes — Mark Blyth, Austerity: The History of a Dangerous…, 100 (+9 more)

Broader Connections

• The efficient-markets hypothesis erased discussion of bubbles and speculation #expands (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 749
• The efficient market hypothesis survived every empirical refutation and became finance orthodoxy #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 758
• The Efficient Market Hypothesis resists empirical falsification through the protective shield of auxiliary hypotheses #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 753
• The efficient-market hypothesis has survived thousands of studies without consensus #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 751
• Packing risky mortgages into opaque derivatives under weak regulation enabled the financial crisis #corroborates (0.71) — Albert Bandura, Moral Disengagement, 1492
• Efficient-markets theorists treated the 2008 crash as confirming their doctrine #expands (0.70) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 494