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But people don't keep putting their money into vending machines that keep eating their money.
People make mistakes, I am perfectly willing to admit that as most libertarians do/should. However, I do not admit that they keep making the same mistake over and over again. It is the fact that people learn from their mistakes and engage only in those behaviors that are mutually beneficial in the long term that allows capitalism to function. If people were to make the same decisions that make them worse overall, then I would agree with you. However, people don't keep engaging in the same action that has made them worse off over and over again. They will eventually change and try something else that does benefit them.
As this chart shows, people DO continue to make the same mistakes over and over again. It shows that stocks with high P/E ratios, generally in exciting new industries, are bad investments (in other words, they're overpriced). Yet people continue to bid these stocks up to astronomical prices, decade after decade, with some sort of new justification why this time is different.
The best stocks are the boring, undervalued stocks. Tobacco, processed foods, paper, etc.
phattonez said:As an aside, how could irrational people force irrational people to act rationally? Just a tangential criticism that I don't want to get to involved in, but is interesting to me.
Because the specific areas in which people are irrational are pretty predictable. Once you know the types of irrational behavior that people are inclined to engage in, it becomes easier to understand it and prevent it.
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