The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street (Paperback)
The book is written in a rather tedious manner -- this happened, then this happened, then this happened -- without making a coherent whole. The doctrine of efficient markets was never more than a zeroth order approximation to reality. It IS very useful (since you have to start somewhere), but only a complete idiot would ever believe in it. It is like simplifying the second law of thermodynamics into "the universe is in the state of maximal entropy (heat death)" -- this would never fly, since it is obviously false, and the same is clearly true of the (in)efficiency of financial markets. The doctrine does not require academic disproof -- the mere observation that there are hedge funds which outperform the broad market for decades running gives all the disproof you would ever need.
The other question (raised by the author, but obscured by the red herring of whether the markets are truly efficient) is whether we should allow the free markets to set prices. Here, the preponderance of evidence is that we should. The bubbles (at least the recent bubbles) seem to stand from the heavy hand of the government interfering with the functioning of the markets by means of monetary and fiscal policy. Without that, the system would certainly NOT function perfectly, but one can certainly steal from Churchill, who said that "democracy is the worst system of government. Except for all the other ones". Same is true of the market.
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