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Thinking that such a level of market efficiency is attainable is utopian thinking. There will always be enough short-sighted people to thwart this. Also, why s

by gpvos 10y ago

Thinking that such a level of market efficiency is attainable is utopian thinking. There will always be enough short-sighted people to thwart this. Also, why should we accept that?

deleted 10y ago
[deleted]
jessriedel 10y ago
> Thinking that such a level of market efficiency is attainable is utopian thinking. There will always be enough short-sighted people to thwart this. This mechanism has a tremendously better track record than the other ones proposed in this thread. No mechanism are perfect, but we should try to improve the working mechanism rather than use the broken one. And there don't seem to be any fundamental barriers in the way. > Also, why should we accept that? For the same reason we should accept other Pareto improvements: if you're doing otherwise, you're letting value go to waste.
fennecfoxen 10y ago
> Also, why should we accept that? Because at least entertaining that outcome is the only rational thing to do if you believe in attaching values to things and doing math on them? Right now people forecast about a 4% real (inflation-adjusted) rate of return on long-term investments. If the helium isn't going to be worth ~5 times as much 100 years from now, then it's more valuable to the world at large if we use it now than to wait 100 years, and we can make up the difference later. If you've got good reasons to attach particular values to the helium in 100 years, or the helium now, or the value of anything else investable in 100 years, then by all means do share, and tell us why everyone else in the market has it wrong (externalities the market participants are inflicting on others, perhaps? that's the classic reason). Then we can look at the math, and challenge each others' assumptions, like rational people in a rational argument. Otherwise, you're just attaching an irrational, spiritual value to the idea of conservation itself, and indicting everyone who doesn't share these values as heretics. While this may be a useful heuristic, it isn't always the best way to discuss a matter.
- zhte415 10y ago
  It's interesting, and a certain rabbit hole of logic. * The person around 100 years in the future is likely dead, so any utility is gained from using it before they die. * Perfect capital markets which price in the future, for example, financial intermediaries paying you to work rather than the employer itself, ceteris paribus more efficient than current compensation schemes, on the condition you get paid 100% of the payroll if becomming CEO and pay back the bank, do not exist. * Tragedy of the Commons - gain political/property rights to an unequal share of common property, then profit from this 'capital' right. * Or an example close to my home, of a port and railway constructed on Tsar bonds with maturities of 100+ years which spurred the development, and chaos, in Northeast China, and turned pretty worthless with revolution and occupation. At the time, one of the most certain investments in the world. What is 'value'? In the short term dictionary definition it is the price someone is willing to pay. Perhaps a tulip, or a cotton, or fur, jacket - the 'value' of these has varied far more than discount factors could determine. Much debate has gone into this for millennia. We simply don't know the future. In retrospect, the long term return on capital is the long tern discount factor. But we do know it isn't priced-in efficiently, as we know we don't know what the future will be. Future value is a dependent variable. Though I am a fan of long term trends for short term things, outside of a couple of centuries, long term trends tend to fail, and 'this time it's different' even if drawn over the past half century doesn't work unless not a lot else is changing.
  - marcosdumay 10y ago
    At the other direction, there is the energy case, where our current "overspending" of fossil fuels is subsidizing the solar power evolution that will probably make (Earth bounded) energy sustainable for once. We simply don't know the future. That's valid for both directions.
- snowwrestler 10y ago
  He asked why we should accept that and you explained why he should entertain it. So you didn't really answer his question. There's a big difference between accepting and entertaining. > If you've got good reasons to attach particular values to the helium in 100 years, or the helium now, or the value of anything else investable in 100 years, then by all means do share, and tell us why everyone else in the market has it wrong Of course the market today is wrong about the value of things 100 years from now. If it were possible to predict the value of things 100 years from now, we would not need a market to allocate resources. Markets beat central planning not because they are superior at predicting the future, but because they are superior at adapting to the surprising future as it arrives. Markets are quite bad at predicting the future. Market prices capture today's collective thinking about the future, but that's not the same thing as actually predicting the future--and sometimes it is the opposite, as in a bubble. Markets walk randomly to price things, but there might be no-return boundaries lurking in our future. If we run out of helium, it doesn't matter if the market corrects to a proper scarcity valuation. Raising the price of something does not physically create more of it.
jerf 10y ago
You know, blithely proposing government solutions to this problem needs to address the fact that it's a government that has created this problem in the first place, keeping the price at below market price for very long periods of time. I'm not necessarily going to claim the market will perfectly allocate this (for one thing there's a lot of moral decisions and time preferences tied up into one's belief about what perfect allocation is), but just waving government at the problem won't fix it either, because that's what we have now. That's the problem. If that was the solution, we wouldn't be talking about this, because it wouldn't be a problem. However ignorant you may think it is to just wave "market" at the problem, at least it would be a change and might have a different result.
- gpvos 10y ago
  > it's a government that has created this problem in the first place, keeping the price at below market price Okay, there's a data point I missed. The price should be appropriate, and in this case too high is better than too low. I agree in general that when the market can do something, it should. However, I don't think the market is capable of seeing into the far future (see petrol prices, which are way too low in the US and only more-or-less appropriate in Europe due to taxes).
  - jerf 10y ago
    The market is not capable of seeing into the far future, because nothing is capable of seeing into the far future. This is not mere wordplay. It's a vital component to understanding how the world works. After all, remember what article this is that we're commenting on; a discovery of a potentially new significant source of helium. After you've fiddled with the market because you know it's making helium too cheap, how are you going to feel after something like this comes up five years later, having made medical treatments and other such things more expensive only for it to turn out that your sure and certain knowledge of the situation was wrong? The "time value of money" is actually directly related to the fact that uncertainty compounds exponentially. Future money is worth less because you're that much less certain that you'll even have the money, or what you can spend it on. But the point about uncertainty goes beyond just money. There's a reason why "five year plan" is a joke for people educated in history.

by gpvos 10y ago

Thinking that such a level of market efficiency is attainable is utopian thinking. There will always be enough short-sighted people to thwart this. Also, why should we accept that?

deleted 10y ago

[deleted]

jessriedel 10y ago

> Thinking that such a level of market efficiency is attainable is utopian thinking. There will always be enough short-sighted people to thwart this. This mechanism has a tremendously better track record than the other ones proposed in this thread. No mechanism are perfect, but we should try to improve the working mechanism rather than use the broken one. And there don't seem to be any fundamental barriers in the way. > Also, why should we accept that? For the same reason we should accept other Pareto improvements: if you're doing otherwise, you're letting value go to waste.

fennecfoxen 10y ago

> Also, why should we accept that? Because at least entertaining that outcome is the only rational thing to do if you believe in attaching values to things and doing math on them? Right now people forecast about a 4% real (inflation-adjusted) rate of return on long-term investments. If the helium isn't going to be worth ~5 times as much 100 years from now, then it's more valuable to the world at large if we use it now than to wait 100 years, and we can make up the difference later. If you've got good reasons to attach particular values to the helium in 100 years, or the helium now, or the value of anything else investable in 100 years, then by all means do share, and tell us why everyone else in the market has it wrong (externalities the market participants are inflicting on others, perhaps? that's the classic reason). Then we can look at the math, and challenge each others' assumptions, like rational people in a rational argument. Otherwise, you're just attaching an irrational, spiritual value to the idea of conservation itself, and indicting everyone who doesn't share these values as heretics. While this may be a useful heuristic, it isn't always the best way to discuss a matter.

zhte415 10y ago
It's interesting, and a certain rabbit hole of logic. * The person around 100 years in the future is likely dead, so any utility is gained from using it before they die. * Perfect capital markets which price in the future, for example, financial intermediaries paying you to work rather than the employer itself, ceteris paribus more efficient than current compensation schemes, on the condition you get paid 100% of the payroll if becomming CEO and pay back the bank, do not exist. * Tragedy of the Commons - gain political/property rights to an unequal share of common property, then profit from this 'capital' right. * Or an example close to my home, of a port and railway constructed on Tsar bonds with maturities of 100+ years which spurred the development, and chaos, in Northeast China, and turned pretty worthless with revolution and occupation. At the time, one of the most certain investments in the world. What is 'value'? In the short term dictionary definition it is the price someone is willing to pay. Perhaps a tulip, or a cotton, or fur, jacket - the 'value' of these has varied far more than discount factors could determine. Much debate has gone into this for millennia. We simply don't know the future. In retrospect, the long term return on capital is the long tern discount factor. But we do know it isn't priced-in efficiently, as we know we don't know what the future will be. Future value is a dependent variable. Though I am a fan of long term trends for short term things, outside of a couple of centuries, long term trends tend to fail, and 'this time it's different' even if drawn over the past half century doesn't work unless not a lot else is changing.
- marcosdumay 10y ago
  At the other direction, there is the energy case, where our current "overspending" of fossil fuels is subsidizing the solar power evolution that will probably make (Earth bounded) energy sustainable for once. We simply don't know the future. That's valid for both directions.
snowwrestler 10y ago
He asked why we should accept that and you explained why he should entertain it. So you didn't really answer his question. There's a big difference between accepting and entertaining. > If you've got good reasons to attach particular values to the helium in 100 years, or the helium now, or the value of anything else investable in 100 years, then by all means do share, and tell us why everyone else in the market has it wrong Of course the market today is wrong about the value of things 100 years from now. If it were possible to predict the value of things 100 years from now, we would not need a market to allocate resources. Markets beat central planning not because they are superior at predicting the future, but because they are superior at adapting to the surprising future as it arrives. Markets are quite bad at predicting the future. Market prices capture today's collective thinking about the future, but that's not the same thing as actually predicting the future--and sometimes it is the opposite, as in a bubble. Markets walk randomly to price things, but there might be no-return boundaries lurking in our future. If we run out of helium, it doesn't matter if the market corrects to a proper scarcity valuation. Raising the price of something does not physically create more of it.

jerf 10y ago

You know, blithely proposing government solutions to this problem needs to address the fact that it's a government that has created this problem in the first place, keeping the price at below market price for very long periods of time. I'm not necessarily going to claim the market will perfectly allocate this (for one thing there's a lot of moral decisions and time preferences tied up into one's belief about what perfect allocation is), but just waving government at the problem won't fix it either, because that's what we have now. That's the problem. If that was the solution, we wouldn't be talking about this, because it wouldn't be a problem. However ignorant you may think it is to just wave "market" at the problem, at least it would be a change and might have a different result.

gpvos 10y ago
> it's a government that has created this problem in the first place, keeping the price at below market price Okay, there's a data point I missed. The price should be appropriate, and in this case too high is better than too low. I agree in general that when the market can do something, it should. However, I don't think the market is capable of seeing into the far future (see petrol prices, which are way too low in the US and only more-or-less appropriate in Europe due to taxes).
- jerf 10y ago
  The market is not capable of seeing into the far future, because nothing is capable of seeing into the far future. This is not mere wordplay. It's a vital component to understanding how the world works. After all, remember what article this is that we're commenting on; a discovery of a potentially new significant source of helium. After you've fiddled with the market because you know it's making helium too cheap, how are you going to feel after something like this comes up five years later, having made medical treatments and other such things more expensive only for it to turn out that your sure and certain knowledge of the situation was wrong? The "time value of money" is actually directly related to the fact that uncertainty compounds exponentially. Future money is worth less because you're that much less certain that you'll even have the money, or what you can spend it on. But the point about uncertainty goes beyond just money. There's a reason why "five year plan" is a joke for people educated in history.