What "market triumphalism" are you referring to Professor Michael Sandel?

Michael Sandel, in “The Art of Theory Interview” refers to: 

“a tendency, over the past three decades, of economics to crowd out politics. This has been an age of market triumphalism. We’ve come to the assumption that markets are the primary instruments for achieving the public good.”

And that is a much distorted, and quite often a very interested version of what is actually happening.

Over the last few decade banks, instead of allocating their credit based on adjusting to the perceptions of credit risk, by means of the interest rates (risk premiums), and the size of their exposures, have also had to adjust those credits to capital requirements (meaning equity requirements), and that are also based on the same ex ante perceived credit risks.

“More risk more equity – less risk much less equity” has translated into banks earning much higher risk adjusted returns on equity when lending to “the infallible” than when lending to “the risky”. 

For instance, a bank, according to Basel II, when lending to an infallible sovereign, can hold zero equity but, when lending to a citizen, it has to have 8 percent of equity.

That means banks can leverage their equity 12.5 times to 1 lending to citizens while not even the sky is the limit when lending to their sovereign. 

Professor Sandel, what on earth has that do with "market triumphalism"? It has all to do with an obnoxious non-transparent triumph of government powers.

And the credit risk aversion introduced by bank regulators, effectively blocks "the risky" from having fair access to bank credit, and thereby impedes equal opportunities and promotes inequality.

Is this all a conspiracy of some mighty self declared "infallible", against us their declared "risky" citizens?

It looks like we honest citizens again need to take refuge in a Sherwood Forest, in this case among the trees making a living in the world of shadow-banking. Hell, they are now even trying to convert our Robin Hood into a Sherif of Nottingham tax-collector for King George.

This financial crisis did not disprove the efficient market hypothesis.

One of the most mentioned aspects about the current bank crisis is that in much it was a consequence of Alan Greenspan believing blindly in the efficient markets hypothesis, a hypothesis that became so thoroughly discredited.

Sorry… what efficient markets? With respect to the allocation of bank credit, the markets were completely distorted by the risk-weighted capital requirements, and so that hypothesis had no chance to be proven or disproven.

The capital requirements were and are much lower for what is perceived as absolutely safe, than for what is perceived as risky, and so the risk-adjusted returns on bank equity are much higher on assets perceived as absolutely safe than on assets perceived as safe.

In terms of the equity markets this would be something similar to the government multiplying the profits of investors, by paying them bonuses or similar subsidies, whenever they invested in shares with low volatility and not in shares with high volatility. Do you really think that would allow for an efficient market hypothesis to work free at its leisure?

I am not saying that the markets behave efficiently all the time but that, this time at least, it was clearly not the fault of markets, but the fault of dumb regulators.

PS. These comments were inspired by reading Chapter 1, "Primordial Seeds" in James Owen Weatherall's "The Physics of Wall Street" and which contains a fascinating description of the origins of the hypothesis and of its first and almost forgotten originator Louis Bachelier.

PS. I should acknowledge Tim Harford's arguments that though not the same do point in the same direction.