EOI board member Stan Sorscher takes a an insightful look at a new form of market failure: “group-think”:
Markets are powerful and efficient. Markets fail.
Engineers study failure. When we design a structure or a system, it is our professional obligation to account for known failure mechanisms, and produce a robust, practical, safe design. We don’t rely on invisible hands.
Economists will quietly and reluctantly acknowledge several conventional mechanisms for market failure.
The housing bubble and financial crisis illustrate a new mechanism, which we should add to our list of failure modes — market failure by “group-think.”
Read more on Huffington Post.
Stan Sorscher is a member of EOI’s Board of Directors. The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of the Economic Opportunity Institute.