Pump and Dump: The Rancid Rules of the New Economy

U.S. policy-makers have offered their main responses to the New Economy scandals, making it a good time to ask what, if anything, they seem to have learned from the free market experiments of the 1990s. We propose that the wave of corporate fraud provides an opportunity to test two key assumptions underlying neoliberal policies. One is that pushing risk-taking and responsibility down to the level of ordinary individuals is in their interest (and society’s), as it unleashes creativity and initiative. The second is that markets are selfcorrecting—in terms of prices because the actions of self-interested actors (in the aggregate) will cause prices to move toward their “true” value, and in terms of behavior because business actors will refrain from fraud out of a concern for their reputation (if you become known as a cheat, others will not do business with you).

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