Is the Market Rational After All?

by Charles Hugh Smith
Of Two Minds

This is the market we have now: dominated by delusional, irrational central planners with unlimited powers to create money out of thin air to fund their manipulations.

For the past decade, attempts to explain the psychology of markets have been dominated by behavioral economics: rather than being rational actors as presumed in classical economic models, humans are often profoundly irrational and prone to cognitive distortions and errors that render their choices anything but rational.

Even the wisdom of crowds–that in aggregate, crowds make better decisions than individuals–is being questioned.

Ironically, while the clinical focus has been on individual irrationalities and frailties, markets have been increasingly controlled by a handful of central planners: central banks and state authorities who are intervening in supposedly free markets (i.e. outright manipulation) to an unprecedented degree.

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