What I shall be interested in seeing is whether other Chicago School accolytes begin to accept that fact that you cannot simply assume rational actors respond to your choice of stimulous instead of other stimulous chocies -- as well as the overall problems of information and risk assesment in an increasingly opaque market. A market made more opaque by deregulation and the incentive of rational actors to make it opaque.
Why I Find the Fannie/Freddie Theory Absurd With the total meltdown of the financial markets, we have seen the regrouping of the two groups that had preached the doctrine of the Market. On the one hand, we have the Republicans who were all about "the ownership society." OTOH, we have the U of C school and associated Libertarians who have the same belief that owning a copy of "The Fountainhead" conveys knowledge of economics that certain SCAdians have that sending membership dues to Milpitas makes you an expert in all things between 600 and 1600.
Both groups (and one should not confuse them, although one finds some overlap) have settle on the same culprit: Fannie Mae and Freddie Mac. While there is much to loath in the management of these companies, the purported evil Democratic (or generically government) plot to destroy the market by dumping cheap loans does not even come close to explaining the total meltdown, for reasons I explain below. ( Collapse )
