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Thursday, April 29, 2010

Markets and Correction of Error

If money can be made bucking market trends (shorting, etc.), people will have an incentive to uncover, correct, and limit the damage from errors in the market.

Corollary: Restrictions on shorting, etc., lock in error and magnify the damage.

Isn’t it funny that those who try to make hay out of the imperfection of markets are most enthusiastic about measures that would exacerbate the imperfections?

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.