Bitcoin, Efficient Markets, and Efficient Financial Sectors

John Quiggin had a good piece in the NYT, pointing out how the sky high valuations of Bitcoin undermine the efficient market hypothesis that plays a central role in much economic theory. In the strong form we can count on markets to direct capital to its best possible uses. This means that government interventions of various types will lead to a less efficient allocation of capital and therefore slower economic growth.

Quiggin points out that this view is hard to reconcile with the dot-com bu...