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Economic theory is not predicated on such a thing. Information asymmetry is a modeled and studied effect in economics. The efficient market hypothesis is a mode
by conanbatt 10y ago
Economic theory is not predicated on such a thing. Information asymmetry is a modeled and studied effect in economics. The efficient market hypothesis is a model that lets you explain certain phenomena that happen even if information is perfect, and though real life is not perfect, it has resemblances to such scenarios.
- Clubber 10y agoIt's based on assumptions as he described: "Economics has been subject to criticism that it relies on unrealistic, unverifiable, or highly simplified assumptions, in some cases because these assumptions simplify the proofs of desired conclusions. Examples of such assumptions include perfect information, profit maximization and rational choices." https://en.wikipedia.org/wiki/Economics https://en.wikipedia.org/wiki/Economics
- conanbatt 10y agoNot economics, some models of economics, and economists and the field is very well aware of the limitation of their own modeling, since the rest is borderline sociology with very limited capacity of experimentation, and some of the most prominent economists (Marx, Adam Smith, Keynes) wrote extensively in sociological terms.
- venantius 10y agoPerhaps a more narrow description would be for me to have said most free-market economic theory and/or Chicago-school theory, which is what I studied. Other schools of economic thought do a better job of explicitly taking into account the assumption that information is costly.