"Hayek was influenced by the biological metaphor of evolution (in contrast to Walras, who was inspired by notions in physics of “equilibrium”). Darwin had talked about the survival of the fittest, and Social Darwinism similarly contended that ruthless competition with the survival of the fittest firms would imply ever-increasing efficiency of the economy. Hayek simply took this as an article of faith, but the fact of the matter is that unguided evolutionary processes may, or may not, lead to economic efficiency. Unfortunately, natural selection does not necessarily choose the firms (or institutions) that are best for the long run. One of the main criticisms of financial markets is that they have become increasingly shortsighted. Some of the institutional changes (such as investors’ focus on quarterly returns) have made it more difficult for firms to take longer-run perspectives. In this crisis, some firms complained that they didn’t want to take on as much leverage as they did—they realized the risk—but if they hadn’t, they wouldn’t have survived. Their return on equity would have been low, market participants would have misinterpreted the low return as a result of lack of innovativeness and enterprise, and their stock price would have been beaten down. They felt that they had no choice but to follow the herd—with disastrous effects over the long run, both to their shareholders and to the economy."