Group-think caused the market to fail

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.

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Posted in An Inclusive Economy

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