If the “free market” is perfect, why do companies often make such big mistakes, like this one?

Galacto: If the “free market” is perfect, why do companies often make such big mistakes, like this one?
It is now being learned that mass layoffs – especially with publicly-traded companies – don’t bring the positive results expected and do in fact lead to negative bottom line results. If the so-called free market were perfect, wouldn’t corporate heads know this before making such catastrophic decisions?

Mass layoffs, it turns out, hurt not only many employees, but the very companies that do the layoffs supposedly to help their bottom lines and stock prices.
https://www.cnbc.com/id/27836801/

Answers and Views:

Answer by windowman
When a company lays people off, it’s because there is not enough work for them to do. Typically, successful companies make money on their employees. That is what allows them to produce. When they have no customers, they have no work for their employees. So instead of hemorrhaging money, they lay people off. Happens all the time. Has nothing to do with any failure of the free market. Rather, it is the free market at work. On the opposite side of the coin is the government who never lays anybody off. Thus it is bloated, slow, inefficient, bleeds money and is always broke and begging for more.That’s because they feel no obligation to stockholders–the taxpayers.

Answer by Gaijin
Normally that would be the right way to shore up (investors) bottom line but with all of the stories about big bonuses,golden parachutes and huge spending by higher ups,mass layoffs appear to be just another way of higher ups to line their own pockets at the expense of the little guys (workers).When every household is struggling to hang on in this economy,anything big business does that’s not positive for working people is going to be looked at as wrong.

Don’t be surprised if some are boycotted and their stocks dropped by low end investors.Bank of America is a good example,they raise prices and lower interest to pay off stimulus and as a result,they are losing customers.

Seems corporate heads don’t see it that way.

Answer by Jerry Lee
Layoffs sometimes work to make a fast, short-term boost in stock prices.

The “free market” is an ideal which does not exist. It supposes people have lots of correct information, and make rational decisions. Whole books are written about actual market failures and alternatives.

One is: