It's been a while. Anybody miss me? Anybody remember me? Ah well. I no longer blog. It was like when I was a hippie. The hours were good but the pay was lousy. As to being an expert, on finance I'm a rude amateur. I will now prove this.

I've been reading books on finance for the past six months. All I can say is I know what I don't know, which is a lot. I'd like to talk about the Fox book, but unfortunately I haven't been able to lay a hand on one. Hopefully the TPM genie will cause it to materialize on my doorstep and I'll take a glimpse before the week is over. At any rate, failure to read never stopped a book reviewer.

My first impulse is to say of course the market's not rational. In fact, it's downright perverse. Instead we'll go for some nuance. When we speak of rational, we could think in terms of rational in the large or at the atomistic level.

From a worm's eye standpoint, the market -- I assume we're talking about financial markets, not the market for fruits and vegetables -- is a horde of traders, institutions, rules, and suckers. Naturally the information, integrity, and intelligence of agents (fancy micro talk!) varies stupdendously. In any case, I would say they are each rational in their own way. They are consciously self-seeking. They are also human. The philosopher David Hume, whom I've never read, single-handedly destroyed rational choice theory a long time ago when he noted that man is a bundle of contradictions. Take your axioms and shove 'em.

Bubbles are sometimes said to be expressions of irrationality. No. The vast majority of traders, both professional and amateurish, were aware that asset prices could not rise indefinitely. The trick of course is to jump on as the level rises and jump off before it falls. Doesn't everybody know this? There may be some nitwits who thought the Dow, for instance, was going to 36,000. That prediction took a talent so precious it dare not speak its name, lest we all burst into flame at the sound of it. To the contrary, I would say most people were like me. I knew better. I liked the looks of my portfolio and said gimmee just a little bit more. It takes courage to jump onto a dull but safe four percent rate of return when the getting looks so much better. I didn't have it.

(The housing market is an exception to the thrust of this rant. I'll deal with it in a subsequent post.)

The finance book that made the biggest impression on me is Kindleberger's "Manias, Panics, and Crashes." (Mind the sequence.) Finance bubbles and the ensuing economic calamities are as old as money. For centuries, it's been just one damn thing after another. That's why I hate the whole "black swan" meme. The idea that the bubble collapse is a "fat-tailed event" (much less improbable than everybody realizes). Rubbish. At any one moment it is improbable, but not as improbable as you think. Looking forward, in contrast, the inflation and bursting of another bubble I would rate a virtual certainty.

Anybody entrusted with financial regulation should have known that and taken prudential action in advance of the breakdown. The fact that they did not suggests malfeasance, not mere misfeasance. How much have the leading lights of this catastrophe suffered personally for their alleged incompetence? Are any of them in jail? Under threat of prosecution? Stripped of their vast wealth? Deprived of a few premium cable channels? No? What, they're even richer than before? They're running the government?? Oh . . .

So I come back to the market being fundamentally perverse, a field where the shearing of the sheeple -- a veritable continuous redistribution of the wealth, by God -- is the order of the day. The orders have yet to be countermanded. The most liberal president evah told a gaggle of bankers, I'm the only thing between you and the pitchforks. Oh yes he did.

In the large, the spectacular busts engendered by financial volatility cause widespread human misery and gross waste of valuable resources. So the irrationality is at the systemic level. That it is tolerated is due to the vacuity of our intelligentsia and the irrationality of our political culture. Media personalities are the circus clowns in this culture. Bona fide experts who participate become clownish in the process. How could they not. Can you have a serious conversation with somebody whose questions are the intellectual equivalent of a squirt from a seltzer bottle. No, the function of the financial media is not to inform, and no small wonder, because those who understand the game don't need to be informed, and those who don't are impervious to illumination.

I do like the noises coming out of the Administration, to the effect that we should all have access to an array of "plain vanilla" financial products, and people should have to affirmatively opt out of them if they want something else. Simple 30-year fixed rate mortgages. Insured bank deposits. Portable, safe defined-benefit pensions to supplement Social Security. And more Social Security, not less. A safety net for the middle class. It would be a rational self-defense against our own worst instincts, not to mention the legion of predators that some are pleased to characterize as the efficient market. If only people would take advantage of it. Would we? Forget about rational markets. Do we have rational citizens?