"The Myth of Efficient Markets"
Excellent piece from Massocio at FDL, who quotes several recent examples of corruption (although not the wage fixing case by Silicon Valley icons like George Lucas and Steve Jobs). Here is the conclusion:
The concept “market” may be perfectly efficient and wonderful in every respect, but the practical application of the term in the real world is pretty much like every other human activity: plenty of effort by participants to game the system for their personal benefit and screw everyone else.
It’s bizarre that so many people cling to the myth of market marvelousness despite massive evidence of market corruption and inefficiency. People seem to think that each example of corruption or inefficiency is a bad apple who should be punished. But, of course, we don’t do that any more. The people behind these examples are being sued, not indicted. Their corporations may or may not pay up, but no one is going to jail, and no one is being punished. Every single one of the responsible people will walk away with a pocket full of dirty money, and their reputations, if they care about them, will be restored after the obligatory time away from the media spotlight.
Beyond that, how could anyone think that any human activity wouldn’t be subject to lying, cheating and stealing, including the sacred market?
I find myself returning again and again to Federalist 51:
But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions. This policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of human affairs, private as well as public.
Now, I think a libertarian might bristle at government being "the greatest of all reflections on human nature" because the market. My rejoinder would be that the absence of government -- the blank space, the void where government would be -- reveals the defects in the libertarian reflection on human nature quite precisely; we've had, in essence, a controlled experiment in doing without governance in the markets over the last forty years, and the result has been an orgy of looting, criminality, and the hollowing out of the real economy of the United States.
So, the market needs governance; and a "free" market without governance rapidly turns into its unfree opposite, except for a very few winners. We need to "supply the defect of better motives" with checks and balances in and on the market, just as we need "governors" on any system if we want to avoid runaway positive feedback loops.