U of A SSHRC panel event explores why markets fail - Part 1/3

Randall Morck, a University of Alberta School of Business professor, believes that market regulators would do well to practice Buddhist philosophies.

Perhaps it is because markets, as Buddha said of life, are impermanent. Perhaps it is because markets are analogous to the idea of illusion in Buddhist thought. Or it may simply be that markets cause a cycle of both pleasure and suffering.

Randall explored this and other important points in helping the public understand why markets fail in his keynote address at a presentation celebrating social sciences and humanities research on Tuesday afternoon at Lister Conference Centre.

The presentation sponsored by the Office of the Vice-President (Research) is a celebration of the university's partnership with the Social Sciences and Humanities Research Council, now celebrating its 31st year.

"Stock market crises recur historically, though not on any predictable cycle," Randall says. "Investors seem to forget normal historical returns to investment, and continue trying to pile into investments that promise higher-than-normal returns. The anger accompanying the crisis usually triggers over-regulation, which then leads into over-deregulation when the next cycle starts."

Randall says that there are some eerie elements to market failures, noting that the problem-plagued mortgage corporation Fannie Mae that figured prominently in this recent economic crisis was created in response to the market failure of 1929 as means to take mortgages away from the banks.

Following Randall's address, a handful of distinguished social sciences researchers from the university discussed the issue of market failure in a forum moderated by U of A Chancellor Linda Hughes. Among the panellists was law professor Eric Adams and Alison Taylor, professor in the Department of Educational Policy Studies.

Eric is not so much concerned with why markets fail as he is with what happens after the crash. As a constitutional lawyer, Eric agrees with Randall's observation that market failures have historically led to some sort of governmental response meant to protect citizen from the effects of such collapses in the future. Eric adds that this action also leads to some form of constitutional challenge

"I always get excited because I know what's around the corner is some moment of constitutional law about to be created," he said. "Right now, we're seeing that in the federal government announcing that they're going to have a national securities commission."

Alison's interest in market failure lies more with the social impact of markets in general, specifically as they apply to education. In some ways, that impact can be seen now, such as the reduced public spending on colleges and universities. The erosion of public values and public goods, the shift from a collective interest to more individual self-interest, is something that should be of great public concern, she notes.

"The recent failure of financial markets encourages me to think about markets overall," said Alison. "I'm looking at policy directions in K-12 and post-secondary," she says, where private enterprise is putting more emphasis on the market value of education.

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[CliveYouBeauty]

This, truely, is real nutter stuff.