For the perfect market theory to have been discredited, free markets needed to exist, and they did not.

Sir, Gillian Tett references a paper in Central Banking Journal December 2012, by Paul Wooley and Dimitry Vayanos, which I have not read, but that is quoted stating “Like regulators funds have been following procedures based on the discredited theory of perfect markets”, “Momentum trading part of a wider structural flow” December 21. 

I do not know about the procedures of funds, but, let me assure you, regulators did not believe in any theory of perfect markets; on the contrary, what they did, and still do, was to destroy it. 

When they imposed on the banks capital requirements based on perceived risks which were already cleared for by the banks and the markets, they completely distorted the financial system. 

In doing so they allowed banks to earn a much higher expected risk-adjusted return lending to “The Infallible” than when lending to “The Risky”. And, as anyone should be able to understand, at least if allowed to understand it or no other agenda stands in their way, that has absolutely nothing to do with free and perfect markets, and so, therefore, no theory about perfect markets could have been discredited by the recent crisis.