“…the general concept of the efficient markets hypothesis is that financial markets are “informationally efficient…” ”

Stretching this concept we may conclude that the market is efficient (the prices reflect the ‘real’ value of the traded assets) because every economic agent acts rationally and that all the pertinent information is always available for everybody. This last sentence might sound far-fetched indeed but: “The third form, known as the strong form (or strong-form efficiency), states that asset prices adjust almost instantaneously not only to new public information but also to new private information.” (ibidem)

So, theoretically, we have perfectly rational economic agents and free flowing information.

In this case (no emotions involved, no shenanigans, brains in perfect working order) why on Earth do we still need the market?

One trained professional (OK, a board, a panel, something: the workload is too big for one individual) would be enough to settle prices based on available information and to adjust them as new information come in, right?

Are you flabbergasted? Well, you should! This is exactly how communists used to run the economies of the ‘popular democracies’ where they had risen to power. (It seems that in the 20 years since the fall of the European communism the concept of ‘popular democracy’ has evolved but nobody notices that this is a huge pleonasm – any real democracy is indeed ‘popular’. The communists used the concept to suggest that only the communist democracy – an oxymoron – was a true democracy; all other forms of democracies being deemed incomplete.

OK, so what’s the point of all this?
Well, some people advocate total deregulation of the economy/market.
As contemporary events have shown us economic trends in a mis-regulated environment give birth to ‘too big to fail’ entities. I’m afraid that a completely deregulated one will produce, in time, nothing but even bigger conglomerates.

So what should we do? Tighten the existing regulation?
We should adopt a much simpler set of rules based on on a staunch philosophy: maintaining the real freedom of the market instead of allowing the ‘significant’ agents to bend the rules in their favor.

Regulation should just state what is unacceptable and not give recommendations, directives, indications, etc.