3 ms·
Quick Question: Why is efficiency a desired outcome in markets? Or is it just a natural outcome of competing players?
by skdjksjdksjdk 9y ago
Quick Question: Why is efficiency a desired outcome in markets? Or is it just a natural outcome of competing players?
- eanzenberg 9y agoFor planning, risk assessment and strategy.
- codeplea 9y agoThat's a good point. I think efficiency is desired because it usually provides fairness. In an inefficient market, trades are at the "wrong" price, and so that seems unfair. When there is a trade-off between inefficiency and fairness, we seem to prefer fairness (e.g. insider trading laws make the market less efficient but more "fair").
- yellowstuff 9y agoMatt Levine of Bloomberg writes a lot about how insider trading laws seem to be about fairness, but are really about theft of information from the rightful owner. It's hard to square a market centered around fairness with the vast informational and technological advantages that professional traders use legally.
- yellowstuff 9y agoThe core social benefit of financial markets is to get capital to where it can be used most productively. This is why Google could get funding in 1998 and why Venezuela can't today.
- bandrami 9y agoWhat did Google's initial funding have to do with the securities market?
- tacostakohashi 9y agoThe angels / VCs that funded it did so with the knowledge that they'd be able to go public later and get their money back out. If there's no market for selling equity in mature companies, there's less incentive for starting or investing in small / growing companies.
- bandrami 9y agoSo, investors simply don't believe in the existence of income?