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In a "perfect free market", customers have access to all of the information required to make the decision, and can make an informed choice on the products and s

In a "perfect free market", customers have access to all of the information required to make the decision, and can make an informed choice on the products and services they buy and sell based on their circumstances. That wasn't the case in this situation. Customers didn't have all of the information, and as a result, were taken advantage of. In regards to the specific fraud component (signing up customers to services they didn't ask for), I think you've just seen the consequences of what happens. Share price tanks, CEO is forced to leave. Again, this comes down to access to information; when it became clear Wells Fargo were committing fraud, the market moved against it due to a reduction in good will/image/reputation. As a result of this information becoming public, fewer customers are likely to sign up to Wells Fargo, meaning the expected profits from this company are likely to be lower than expected previously. The government has a role to keep information available, so society can make a decision about what it deems acceptable corporate practice.

venantius 10y ago
Of course, basically all economic theory is predicated on the assumption that information is basically free and widely available. In reality, this is simply not the case - information is either not free, or it is time-consuming to acquire (and therefore not free in another sense). As soon as one understands this a lot of free market ideology stops making sense and things like Consumer Production Bureaus start to sound like an intelligent way of managing risk insurance for the general population.
- conanbatt 10y ago
  Economic theory is not predicated on such a thing. Information asymmetry is a modeled and studied effect in economics. The efficient market hypothesis is a model that lets you explain certain phenomena that happen even if information is perfect, and though real life is not perfect, it has resemblances to such scenarios.
  - Clubber 10y ago
    It's based on assumptions as he described: "Economics has been subject to criticism that it relies on unrealistic, unverifiable, or highly simplified assumptions, in some cases because these assumptions simplify the proofs of desired conclusions. Examples of such assumptions include perfect information, profit maximization and rational choices." https://en.wikipedia.org/wiki/Economics https://en.wikipedia.org/wiki/Economics
    - conanbatt 10y ago
      Not economics, some models of economics, and economists and the field is very well aware of the limitation of their own modeling, since the rest is borderline sociology with very limited capacity of experimentation, and some of the most prominent economists (Marx, Adam Smith, Keynes) wrote extensively in sociological terms.
  - venantius 10y ago
    Perhaps a more narrow description would be for me to have said most free-market economic theory and/or Chicago-school theory, which is what I studied. Other schools of economic thought do a better job of explicitly taking into account the assumption that information is costly.

venantius 10y ago

Of course, basically all economic theory is predicated on the assumption that information is basically free and widely available. In reality, this is simply not the case - information is either not free, or it is time-consuming to acquire (and therefore not free in another sense). As soon as one understands this a lot of free market ideology stops making sense and things like Consumer Production Bureaus start to sound like an intelligent way of managing risk insurance for the general population.

conanbatt 10y ago
Economic theory is not predicated on such a thing. Information asymmetry is a modeled and studied effect in economics. The efficient market hypothesis is a model that lets you explain certain phenomena that happen even if information is perfect, and though real life is not perfect, it has resemblances to such scenarios.
- Clubber 10y ago
  It's based on assumptions as he described: "Economics has been subject to criticism that it relies on unrealistic, unverifiable, or highly simplified assumptions, in some cases because these assumptions simplify the proofs of desired conclusions. Examples of such assumptions include perfect information, profit maximization and rational choices." https://en.wikipedia.org/wiki/Economics https://en.wikipedia.org/wiki/Economics
  - conanbatt 10y ago
    Not economics, some models of economics, and economists and the field is very well aware of the limitation of their own modeling, since the rest is borderline sociology with very limited capacity of experimentation, and some of the most prominent economists (Marx, Adam Smith, Keynes) wrote extensively in sociological terms.
- venantius 10y ago
  Perhaps a more narrow description would be for me to have said most free-market economic theory and/or Chicago-school theory, which is what I studied. Other schools of economic thought do a better job of explicitly taking into account the assumption that information is costly.