Stock market crashes vs. Rationaliy

From Slate:

But conventional economics is not wrong—or at least, stock-market crashes are no evidence against it. Rational investors in an efficient market should produce frenzies and crashes from time to time. In fact, the more intelligent the investor, the more likely this is to happen.

The fundamental insight is that there is nothing irrational about trying to learn from what other people in the market are doing. Remember that shares have a true value based on the future stream of company profits. But nobody knows what that value is. Smart investors should realize that other smart investors will know things that they do not. If they don't take into account the private information held by other investors, they will make bad decisions, and they can learn only by watching what other people do.