Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member Latest Breaking News Editorials & Other Articles General Discussion The DU Lounge All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

Yo_Mama_Been_Loggin

(114,790 posts)
Wed Aug 7, 2024, 12:05 PM Aug 2024

Krugman: Markets tank; good luck figuring out why

By Paul Krugman / The New York Times

On Oct. 19, 1987, Black Monday, stock prices plunged, with the Dow Jones industrial average falling 22.6% in a day. Many commentators rushed to explain what triggered the crash; a response to some political event, some piece of economic data or whatever.

But economist Robert J. Shiller managed to get a questionnaire out to many market participants as the crash was in progress and found that essentially nobody selling stocks explained their actions as a response to news. Instead, more or less the only important reason given for selling stocks was that … their prices were falling. In other words, the stock plunge looked like a panic that fed on itself.

Shiller later won a Nobel Prize for his work on market irrationality; a prize he shared with Eugene Fama, who is famous for his theory that financial markets are extremely rational and efficient. Don’t let anyone tell you that the Swedes lack a sense of humor.

I’m dating myself here, but I often think about Shiller’s work when markets go wild, as they have the past few days.

https://www.heraldnet.com/opinion/krugman-markets-tank-good-luck-figuring-out-why/

1 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
Krugman: Markets tank; good luck figuring out why (Original Post) Yo_Mama_Been_Loggin Aug 2024 OP
Ah. "market irrationality" orthoclad Aug 2024 #1

orthoclad

(4,728 posts)
1. Ah. "market irrationality"
Wed Aug 7, 2024, 02:39 PM
Aug 2024

But we call it the "Free World" and use the market to justify everything.

What a world.

Latest Discussions»Editorials & Other Articles»Krugman: Markets tank; go...