This isn't a structural flaw in capitalism, that's expecting too much of capitalism.
Of course, no decision-making apparatus is perfect. Our current version of capitalism with all its flaws might be the optimal way to run a society. But we should be clear-eyed about those flaws.
[1] https://www.brainyquote.com/quotes/abraham_lincoln_395631
By your logic, literally every single endeavor that involves human decision-making is flawed in that exact same same way. Socialism is flawed because humans are in the loop. Representative democracies, monarchies, oligarchies, and anarchy are flawed because humans are in the loop. Both science and religion have the same flaw, because humans are in the loop.
It's not that it's untrue... It's just common to any venture where humans are in the loop, so it carries almost no information and isn't worth saying.
I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die? Is Usain Bolt flawed because he has only two legs?
Of course you will. The point about the greater fool theory is that the market system for equities generates a negative feedback loop rather than being dampened by rational actors in the system. This perpetuates an enormously wasteful misallocation of resources.
>I guess capitalism is flawed because resources are not infinite? Is capitalism flawed because humans die?
Something tells me that if I were talking about the soviet shoe factory principle you wouldn't be so eager to excuse socialist misallocation of resources. Could it be that your argument is based more upon tribalism than logic?
American-style venture capitalism is almost unique in terms of the amount of resources a single person can allocate. I think only authoritarian regimes come close to letting one person decide to bet $12 billion on a poorly-considered vision.
Yes, because it's pretty easy to imagine a functioning social system based upon people not being people.
>that's expecting too much of capitalism.
That irrational behavior in the wasteful allocation of resources doesn't generate a negative feedback loop that causes even more waste?
Who said it didn't? I think you're missing my point. The irrational behavior is a flaw. But it's not fair to call it a structural flaw of capitalism. The flaw is prior to capitalism. It's like saying toilets are flawed because people piss on the seat.
No, not at all. The exploiters would just be better at exploiting.
In finance and economics, the greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.
By definition... the problem disappears if actors are rational. This is not a contentious matter of argument. It's in the definition.