Market imperfections -- do they still exist?

One is painfully reminded of our hubris when reading Martin Rees concluding word in Seeing Further: The Story of Science and the Royal Society:

"Any creatures witnessing the sun’s demise 6 billion years hence, here on Earth or beyond, won’t be human—they’ll be as different from us as we are from bacteria."

With this in mind, we might be more inclined to understand that any equilibrium is, at best, a very short-term equilibrium. Market imperfections might not be as much imperfections as the very constant change of the underlying conditions resulting in the possibility of a new short-term equilibrium.

In Imperfect Information and Aggregate Supply, Mankiw and Reis conclude that even such a “solid” relationship as the Phillips curve is not so solid in the short-run, as there seem to be information problems. So far, so good. What isn’t addressed, and probably ought to have been addressed, is the question if there is such a thing as a long-term equilibrium that, in this context, can be expressed through the Phillips curve.  What if there tends to be constant structural changes that might allow us to believe that the economy tends to the old equilibrium, but which in reality, has been supplanted by a different, new equilibrium.  This fact is made subtle clear by the fact that the tools available today still are those of the rational expectations theory, which is from a temporal point of view backwards looking, that is, not able to foresee new facts, apart from skewing the past a little and then believe that will be the future. Here we can remember the quote from Rees and wonder if his statement – though speaking about a vast time span – shouldn’t have philosophic implications for our economic prediction approach. At least, we might become less inclined to look for an ideal world and realize that the ideal is the enemy of the good.