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As such, "the markets will solve it" isn't a great problem-solving strategy (e.g. climate change)
Markets are irrational, not even suitable for simple optimization problems. They do a very poor job at incorporating all available information (e.g. experts who spent February warning us)
Markets do a better job setting prices than anyone else. If you think you have a better way to set prices, please make the suggestion.
There's a difference between saying that markets - referring to capital markets - don't always perform optimally in unusual situations, or react optimally to new situations, and saying there should be some other system for setting prices in goods markets.
There's financial rewards to the ones who correctly identify how the market is not efficient by betting against it. That said, it can stay irrational for months and maybe years.
Going by that logic experts warn us of a recession every year.
So should we put you down as a hard no on the EMH?
Actually, markets do an excellent job of optimizing allocation of resources to match incentives, much like annealing or genetic algorithms. Overreactions like market panics are the temoorary exception. 1/2
The problem is the incentives. Corporate capture of the law, along with public ignorance, results in a third of the market being financial firms and most of the rest being traded by them. It would be fixed if people did not give their money to financial firms to invest.
I don't think markets have a life of their own. They are simply an expression of our actions. A good market is defined as clearing. Nothing in that says they will incorporate all information. Move them in your "formula" from the left hand side of the equation to the right?
Markets move day-to-day based on individual decisions and collectively over long-term are good predictors of value. Inefficiencies in pricing show up because the market participants are not seeing the long-term value. That’s where active investors can make outsize returns.
Look a lot like a description of the "noisy market hypothesis".
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