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CHAPTER 2
Wall Street Finds Religion
F
rank Knight, one of the founders of the Chicago school of free-market capitalism, most famously represented by Milton Friedman, once prefaced an economics textbook with the statement: “It is somewhat unusual to begin the treatment of a subject with a warning against attaching too much importance to it; but in the case of economics, such an injunction is quite as much needed as explanation and emphasis of the importance it really has.” Knight’s caution was prescient, for in its modern form, Chicago school economics has mutated from a style of analysis into a Theory of Everything. For almost any public or social issue, adherents believe, the free market, if allowed to work without obstruction, will consistently produce optimum outcomes. The omnivorous streak in Chicago economics has drawn it into the realms of crime, welfare, education, health care, and other areas once thought to be mostly outside economics’ purview. 19
