Why is it not enough to say the market will self-correct in the long run?

Waiting for long-run equilibrium does not undo the transfers of wealth happening now, in the storm.

John Maynard Keynes · A Tract on Monetary Reform

Through what channel does a bubble's enthusiasm actually spread, if not through statistics?

A bubble spreads through the neighbor's envy, not through numbers: you buy late precisely because others visibly profit.

Charles P. Kindleberger · Manias, Panics, and Crashes: A History of Financial Crises

What mechanism turns the pursuit of self-interest into a result useful to society?

Self-interest, filtered through prices, can produce a good no one intended.

Adam Smith · An Inquiry into the Nature and Causes of the Wealth of Nations

Why do fraud revelations seem to explode exactly when the crash arrives?

Prosperity hides fraud; the crash doesn't create it, it reveals it all at once.

John Kenneth Galbraith · The Great Crash 1929

Why does everyone adjust when a good becomes scarce, even if nobody learns the cause?

Economic knowledge never sits in one place; the price gathers it without asking.

Friedrich A. Hayek · The Use of Knowledge in Society

What three conditions must a group meet to make superior collective decisions?

A diverse and independent crowd can be wiser than its smartest member.

James Surowiecki · The Wisdom of Crowds

What happens to an asset's price when the market price exceeds its intrinsic value?

Intrinsic value is the discounted sum of all future dividends of an asset.

John Burr Williams · The Theory of Investment Value

What hidden motive explains purchasing expensive yet unnecessary goods?

Conspicuous consumption replaces utility with the signaling of social status.

Thorstein Veblen · The Theory of the Leisure Class

What is the main risk of economic planning by a single government?

Central economic planning concentrates power and gradually erodes individual liberty.

Friedrich Hayek · The Road to Serfdom

What can the state do to stop an economic decline when consumers pull back?

In the absence of private spending, public spending can break the spiral of recession.

John Maynard Keynes · The General Theory of Employment, Interest and Money

How does personal self-interest end up feeding an entire city?

Individual self-interest, coordinated by the market, produces collective well-being.

Adam Smith · The Wealth of Nations

Why are the most important events often the hardest to manage?

The events that change the course of history are usually the ones no one anticipated.

Nassim Nicholas Taleb · The Black Swan

What happens when the fast system uses shortcuts in decisions?

Fast thinking acts automatically, while slow thinking requires conscious effort.

Daniel Kahneman · Thinking, Fast and Slow

„Instead of there being a single solution to a single problem, I argue that a great variety of institutional arrangements can work to manage common-pool resources.”

A community can manage a shared resource — a forest, an irrigation canal — together, without needing either the state or a single private owner.

Many believed that if a pasture belongs to everyone, each person brings too many cows and the grass runs out for all. Ostrom studied real villages worldwide and found local rules, written by the people themselves, that prevented exactly this problem. Communities can make good rules, if allowed to.

Elinor Ostrom · Governing the Commons