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The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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Chapter 6: Gene Fama Makes the Best Proposition in Economics

At the University of Chicago’s Business School in the 1960s, the argument that the market is hard to outsmart grows into a conviction that it is perfect.

In the 1960s, the University of Chicago was a lonely outpost. Its Hyde Park campus was a thousand miles from its chief East Coast rivals, hemmed in by the disintegrating, crime-plagued South Side. “This is a Fort Dearborn situation,” declared a character in Saul Bellow’s Hyde Park novel Humboldt’s Gift. “And only the redskins have the guns and tomahawks.” [1]

The economists at Chicago saw their isolation and even embattlement in a more positive light. They inhabited a different intellectual world from their counterparts ...

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