Resident Fellow Alex J. Pollock

Sir, Thanks for Tony Jackson's column "Don't believe bubbles have been scientifically abolished" (August 10). Of course, he's right that bubbles have not been (and cannot be) abolished. He's right to point out the naive faith many politicians have in regulation. He's right that faith in "corporate governance" by fund managers is equally naive. Not only do fund managers have no "special wisdom" but they are themselves hired agents, not stockholders--indeed, agents who promoted notorious stock buy-backs in the name of "shareholder value", and thereby decapitalised banks. He might have added to the list naive faiths in accounting or credit ratings or economic forecasts.

What Mr Jackson misses is the real problem, which is that of knowledge--or rather the inescapable lack of knowledge--of the future. Since no banker, or regulator, or politician, or fund manager, or rating agency, or accountant, or economist can know the future, the long historical series of financial mistakes called bubbles and busts is bound to continue.

Alex J. Pollock is a resident fellow at AEI.