We were informed that "incubator" companies that provide advice, funding, administrative support and marketing to fledgling Internet companies, intending to nurture them to profitability, or at least a lucrative IPO, are now despised, and that the firms that bear that name are shunned by investors. Apparently, buzz is no longer what the investors are after. According to the Times, investors are pulling their money out of the once-popular "growth stocks" and returning to so-called "value funds," which look closely at annual reports, economic indicators and other unromantic data to find sound companies whose stock price is unjustifiably low. It seems investors' notorious "irrational exuberance" has finally passed.

Back in the days when technology stock prices were in the stratosphere, banks rolled out a continuous stream of IPOs and it seemed that any 28-year-old with a talent for technospeak could pull in $10 million in venture capital funding, the public was consumed by a debate: Had things gone too far? Was the market out of whack? Had we left rationality permanently behind? As Yale economist Robert Shiller put it, the market was in a state of "irrational exuberance." Mass psychology had driven stocks to levels far beyond the underlying values of the companies.

But some argued that irrational exuberance might not be irrational after all. With the development of revolutionary new technologies, there was no reason stocks shouldn't continue to rise, perhaps even bringing the Dow up to 36,000. Then the market collapsed, and the debate died down. Shiller et al. seemed to have won the day. The market had been out of whack, it was agreed; now a "correction" had ensued and rationality would be safely restored. Still, it was little noted at the time that this consensus doesn't quite work doctrinally. The drop of over 1,500 points in the NASDAQ, without the surfacing of dramatic new information, is not the way rationality is supposed to operate.

Our new "value" market continues to produce swings that leave stockholders reeling. The NASDAQ soared 242 points or 7.9 percent Oct. 13, the second biggest percent change in the market's history. It quickly lost most of that gain, only to rise another 247 points Oct. 19. At that time, many analysts expressed the hope that the market for technology stocks had finally "bottomed out." But it wasn't to be. Last Wednesday the NASDAQ dropped another 190.22 points, losing 5.56 percent of its value. True, recent price movements have been tied to earnings reports and international events in a way that they weren't last winter. But stock prices have been moving with a violence unjustified, in orthodox "rationalist" accounts, by the data coming in.

Take the case of Nortel Networks, the Canadian telecom equipment maker whose disappointing earnings report precipitated the NASDAQ's plunge last Wednesday. The news that Nortel's earnings were $300 million short of expectations resulted in a $55 billion drop in the company's market value. That doesn't seem quite right, does it? And investors fled from other fiber-optics stocks as well, even though it was far from clear that they were experiencing the same problems as Nortel. It used to be that investors were happy to buy a stock with barely a glance at earnings reports, now they panic at the first sign of a shortfall.

So maybe the market's dizzying movement should dispel the hope that we have returned to the safe harbor of rationality, basing our investment decisions on how a company is actually performing, rather than how popular it is with investors. But I would propose an alternate conclusion -- that the market is just as rational as it was last year, or even 10 years ago. And that, in fact, rationality is a pretty useless way of talking about the stock market, one that imputes motive to a inanimate system, mischaracterizes the reasons why people buy stocks and misapprehends the real function of valuation techniques and the analysts who use them.

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