MeatyREADS

Experts

October 1, 2008 – 7:15 pm by BH

Experts are constantly telling investors what to buy. Sometimes they give us good advice and sometimes not. So surely the fact that there are experts who give investment advice can’t explain the trillion-dollar bubble and subsequent meltdown we’re now witnessing. The key additional fact is that experts were selling advice about mortgage-backed assets as if those assets were independent when, in reality, they weren’t at all independent assets. Only once investors realized that the housing market is a national market—not a local one—did it become clear that these securities were extraordinarily risky. Hence the collapse.

That’s David M. Levy (GMU) and Sandra J. Peart, writing at Reason (HT).