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The market can stay irrational longer than you can stay solvent. Efficient market theory is mostly used to justify deregulation, to protect the profits of the

The market can stay irrational longer than you can stay solvent. Efficient market theory is mostly used to justify deregulation, to protect the profits of the big players who can throw the most weight around. Some economists support this (perhaps because their paychecks depend on it, or they were brainwashed at the University of Chicago where the movement was strongest). But I doubt most do, especially these days, so soon after the reminder of the Great Recesssion, 80 years after the Great Depression taught the initial lessons. But Keynes got boring for some I guess, and the allure of the "totally rational human" was clearly too great for some, and attractive to lobbyists. https://www.nytimes.com/2009/09/06/magazine/06Economic-t.html https://www.nytimes.com/2009/09/06/magazine/06Economic-t.htm...

TheOtherHobbes 8y ago
I'm honestly baffled why anyone would take "markets are efficient" seriously. It seems such an obviously rhetorical (i.e. politically expedient, not fact-based) narrative intended to sell the idea that markets are the very best of all possible ways to organise everything - in spite of all the centuries of historical evidence that markets consistently run in an irrational bubble-driven boom-bust cycle with almost insanely destructive opportunity and recovery costs.
- gbear605 8y ago
  What “markets are efficient” means is really that you can’t make more money on the stock market than average unless you put the same time and brain power to it that hedge fund people do, and even then you can only make about as much money as hedge fund traders do. (Assuming a few things, like that you’re only trading based on public knowledge) The logic is this: if this were not the case, then some of those very smart hedge fund people were take advantage of this strategy, making that strategy become the average that everyone wants to beat.
onlyrealcuzzo 8y ago
Isn't the modern interpretation of Keynes a complete bastardization of what he was actually teaching? AFAIK, Keynes claimed that the market is more efficient than not. But he was decidedly not a believer of the efficient market hypothesis! Further, he was mostly concerned with money supply and risk-free government bonds. Sometime between the 60s and the 80s, Keynes got associated with Supply-Side Economics and Laissez Faires (which from my understanding Keynes was completely against). Also, when Keynes was writing -- FIRE (Finance, Insurance, and Real Estate) amounted to about 5% of the U.S. economy. Now it amounts to more than 30%. So, ideas that weren't concerned with those markets probably need to be concerned with them now.

TheOtherHobbes 8y ago

I'm honestly baffled why anyone would take "markets are efficient" seriously. It seems such an obviously rhetorical (i.e. politically expedient, not fact-based) narrative intended to sell the idea that markets are the very best of all possible ways to organise everything - in spite of all the centuries of historical evidence that markets consistently run in an irrational bubble-driven boom-bust cycle with almost insanely destructive opportunity and recovery costs.

gbear605 8y ago
What “markets are efficient” means is really that you can’t make more money on the stock market than average unless you put the same time and brain power to it that hedge fund people do, and even then you can only make about as much money as hedge fund traders do. (Assuming a few things, like that you’re only trading based on public knowledge) The logic is this: if this were not the case, then some of those very smart hedge fund people were take advantage of this strategy, making that strategy become the average that everyone wants to beat.

onlyrealcuzzo 8y ago

Isn't the modern interpretation of Keynes a complete bastardization of what he was actually teaching? AFAIK, Keynes claimed that the market is more efficient than not. But he was decidedly not a believer of the efficient market hypothesis! Further, he was mostly concerned with money supply and risk-free government bonds. Sometime between the 60s and the 80s, Keynes got associated with Supply-Side Economics and Laissez Faires (which from my understanding Keynes was completely against). Also, when Keynes was writing -- FIRE (Finance, Insurance, and Real Estate) amounted to about 5% of the U.S. economy. Now it amounts to more than 30%. So, ideas that weren't concerned with those markets probably need to be concerned with them now.