I'm not going to bore you with why EMH is pointless even giving the oxygen of debate to, or why we should junk behavioural economics here. Instead I'll talk about this collection of essays from one of the most famous of the 20th century's economists.
Hayek's essays are excellently written and showcase his ability to present powerful arguments about the way markets work. His most interesting essays are on competition and how centrally dictated markets falter and suffer from never being able to perform the role of LaPlace's Demon (not his reference but mine and another allusion to their failure to incorporate modern philosophy into their mind sets).
It's too easy to caricature Hayek's views (and his supporters today are crassly guilty of this) as uncritically supportive of free markets. He is quite aware of how they also fall down, especially when it comes to competition. I think, in his view, they are a bad system but the best of the bad systems we've come across. Hayek does however rule out interference with markets and criticises his contemporaries for suggesting markets should have boundaries and for suggesting there're some things markets should not be permitted to dictate. Here I have to disagree. I find the idea that markets should freely arbitrate all human endeavour to be demeaning to the idea of human society. Markets cannot factor in society, differentiation of means and ability or future outcomes. The last of these is the most technically important (from a mathematical point of view) but the others are more important from a human point of view. Markets cannot effectively factor these things in because they are beyond the scope of the interactions that markets are good at regulating - that is instant, or short term, trades. In other words human society is, in one sense, our corporate memory. Tradition is frequently a store of actual learning about what does and doesn't work told as story to help descendants usefully build on what has come before without having to relearn it. Economics cannot factor that in because it does not consider time to have a direction...(there's that failure to come up to date with physics again) but also because it cannot conceive of society as anything but a collective noun for a group of individuals. Economics cannot give substance to communities and the value stored in human relationships.
As Sandel points out - markets, like all media of human interaction, change the humans who participate. Markets are too individual in focus - not in an ideological sense - it's just that they cannot technically conceive of how transactions denoted in discrete mathematics impact upon the continuum that is human society and hence they are necessarily blind both to their own sense of morality and ethics but more importantly to the way they transform schemes of morality that are potentially in conflict with them. Like scientists who are blind the the political context of their work, free market economists (and their opponents) are frequently guilty of being closed minded ideologues.
I was surprised by Hayek's essays - many of them are interesting and insightful, much more so than I was expecting - in part because as one of his critics (armchair only) I have been guilty of caricaturing him in the way described above. Hayek was a more subtle thinker than I have given him credit for. However, in the end his world view fails because he doesn't allow for human beings to be themselves in his approach. He sees markets as a mathematical truth to which we'd all do better if we conformed to its assumptions rather than the other way around.
Would I recommend this? No. I enjoyed the essays but more as a piece of history than as a useful addition to my way of thinking.
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