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> This is only true under the perfect information about future utilities assumption, which is false generally and strikingly false when it comes to financial ma
by skookumchuck 8y ago
> This is only true under the perfect information about future utilities assumption, which is false generally and strikingly false when it comes to financial markets.
There is no such thing as perfect information, and you're not going to get it via government regulation or values fixed by government fiat, either.
Free markets do not rely on perfect information at all. They rely on the participants making their own decisions on what the value is to themselves. Even if you are sure they are wrong.
> actual realized mutual benefit
You also cannot decide for others what is of benefit to them. They may (and surely do) value different factors entirely differently than you do.
- dragonwriter 8y ago> There is no such thing as perfect information Exactly, which is why the microeconomics 101 “free trades have mutual benefit or they wouldn't happen” idea is generally wrong, though it may tolerably approximate reality under the best possible conditions in certain markets.
- skookumchuck 8y agoIt is not wrong. The correct phrase is: "Free trades have mutual perceived benefit or they wouldn't happen." What makes a free trade free is the absence of force or fraud, not perfect information. By the way, imperfect information is also called "risk", and risk affects the price of the trade. It's why responsible people can borrow money at lower rates than irresponsible ones. Or why a car that won't start will sell at a far lower price than one that does, even if the repair is reconnecting a loose wire. Or why you'll be willing to pay more for an item from a reputable dealer than an unknown one.
- antidesitter 8y ago> the microeconomics 101 “free trades have mutual benefit or they wouldn't happen” idea is generally wrong You have provided zero evidence to support your claim that this is “generally wrong”.