Resource allocation -good job or poor job?

In the credit derivatives boom (and the related real estate booms) were the markets doing a good job of determining prices and allocating resources? Were the prices signaling what was valuable in the market, and what was not? What defines value, in a market? Was the market a good source of information for people making decisions? Was the market doing a good job of factoring in (pricing for, and insuring for) risk?