The notion that financial markets know a lot has been around as long as financial markets themselves.   In 1889, stock market chronicler George Rutledge Gibson asserted that when “shares become publicly known in an open market, the value which they there acquire may be regarded as the judgment of the best intelligence concerning them.”  Hints of this same attitude could be found in the work of early economist such as Adam Smith—and even the religious thinkers of the Middle Ages.  While some medieval ecclesiastical scholars argued that lawgivers should set a “just price” for every good to guarantee that producers earned a living wage and consumers weren’t gouged, others, St. Thomas Aquinas among them, held that the just price was set by the market.

From the introduction to The Myth of the Rational Market

As I was thumbing though Justin Fox’s excellent new book this morning, The Myth of the Rational Market, it struck me that, when it comes to financial markets, there is really nothing new under the sun.  The debates being had today –capitalism vs. socialism, free markets and prices vs. “fair” markets and prices, etc. — are the same debate that our ancestors had when they crawled out of caves and began to barter animal skins with one another.  I suspect that 100 years from now, our descendants will be arguing these same points, just as passionately. Read the rest of this entry »