[TomOfTTB]

Krugman is a guy who preaches to the choir while ignoring anyone who might challenge him. Which is why he gets away with such omissions.

Take this paragraph...

"During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. "

That's a straw man if ever there was one. I don't think any economist has ever denied the reality of market corrections. In fact, while Krugman picks out a few choice quotes the fact is many, many economists have been warning about the housing bubble for years. He does eventually address this with one sentence on page 5 but then obscures the issue by quoting politicians denying the bubble (a politician is never going to predict doom and gloom even if they do see it coming)

In the end there were mistakes made in our economy but Krugman's using those mistakes to float a theory that the whole system is flawed even though the system created 26 years of relative prosperity. Just because deregulation went a little too far doesn't mean going in the complete opposite direction is wise.

[kingkongrevenge]

Yeah, the main point of the efficient market hypothesis is that high alpha (CAPM) is very, very hard to achieve, not that markets are steady and only react to new information.