Efficient Markets

Markets are efficient. (Or would be, if left alone.)
In the long run, things will work out.

"In the long run, we are all dead." -- J.M. Keynes

   The Efficient Markets Hypothesis is based on several assumptions, and a conclusion stemming from these assumptions.
1/ All elements of an economy are equal.
2/ Everyone has identical skill sets.
3/ Everyone has equal access to information.
Therefore:
4/ The market will balance.

   The theory, or hypothesis, is that if 1, 2 and 3 are true, then 4, the conclusion, must be true. This follows the rules according to Logic 101. However, in reality, 1, 2, and 3 are seldom, if ever, true. And even if they are, that status will be fleeting. Therefore, following the same rules of Logic 101, the conclusion cannot or will not be true. It's possible that a market may find a balance, but that balance will be momentary.
   The word "hypothesis" comes from the Greek for "foundation" (hypo- "under," and the word -thesis, "idea.") A hypothesis, then, is by definition a proposal or an idea, an unproven supposition, proposing a possible explanation for something and inviting further investigation to develop a proof.
   Economists often take on assumptions, sometimes heroic assumptions, for the sake of a theoretical discussion, and note that if other elements do not change, something specific will happen. But this ceteris paribus (other things equal) assumption is only to enable discussion, and is no guarantee of result.
   However, many accept a hypothesis as true despite a lack of evidence, as if the very act of saying or declaring the idea is proof enough. Yet many economic fundamentalists accept the Efficient Markets Hypothesis as true even as they dismiss Darwin's ideas as "only an idea, and unproven."

   There is a great deal of evidence to support Darwin's theory of evolution, and almost none to support the idea of "efficient markets." Economic fundamentalists have embraced the Efficient Markets Hypothesis to further their position that the best way to deal with business cycles is to leave them alone. The cycle is an economy's natural way of cleaning house, and washing out inefficient participants, be they firms or workers.

  One function of government, however, is to smooth out the business cycle, intervening when and as appropriate. Otherwise, the cycle of boom and bust continues, with usually harmful and sometimes disastrous consequences to those unable to ride through the cycle.

   Basic to American democracy is the concept that all people are equal, endowed with certain rights that cannot be taken away, including the rights to life, liberty, and the pursuit of happiness. But to leap from that premise to the notion that all have equal skills, talents, education, and the opportunity to develop those skills and talents through education is a heroic assumption, and a risky one to take.

   So another function of government is to provide opportunities for all to develop -- through education and training -- their skills and talents.
   Failure to feed public education is to starve society.

What might have been, could have been, should have been or would have been, if, if, if, and if -- wasn't. Deal with it.

"The saddest words of tongue or pen
Are just these four:
It might have been." -- Rudyard Kipling