Yes. It is exactly how you would expect the market to work.
I can tell a story very easily in which the financial markets were a casualty of the recession, not a cause of it.
I wonder how many economists would argue that the world wasn’t made a much better place by the financial development that occurred from 1980 onwards. The expansion of worldwide wealth—in developed countries, in emerging countries—all of that was facilitated, in my view, to a large extent, by the development of international markets and the way they allow saving to flow to investments, in its most productive uses.
Krugman wants to be the czar of the world. There are no economists that he likes. (Laughs)
NY:So you still think that the market is highly efficient at the overall level too?Fama: Yes. And if it isn’t, it’s going to be impossible to tell.