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I might be misunderstanding what you're saying here, but are you sure you're right? Fama originally predicated the model of the efficient market (the efficient

I might be misunderstanding what you're saying here, but are you sure you're right? Fama originally predicated the model of the efficient market (the efficient market hypothesis) on the idea of informational efficiency. Information asymmetry is a fundamental measure involved in the idealized model of an efficient market. What you're mentioning about rational actors is actually a different topic altogether in economics. Or have I misunderstood what you're getting at?

westurner 8y ago
I was interested, so I did some research here. Rational Choice Theory https://en.wikipedia.org/wiki/Rational_choice_theory https://en.wikipedia.org/wiki/Rational_choice_theory Rational Behavior https://www.investopedia.com/terms/r/rational-behavior.asp https://www.investopedia.com/terms/r/rational-behavior.asp > Most mainstream academic economics theories are based on rational choice theory. > While most conventional economic theories assume rational behavior on the part of consumers and investors, behavioral finance is a field of study that substitutes the idea of “normal” people for perfectly rational ones. It allows for issues of psychology and emotion to enter the equation, understanding that these factors alter the actions of investors, and can lead to decisions that may not appear to be entirely rational or logical in nature. This can include making decisions based primarily on emotion, such as investing in a company for which the investor has positive feelings, even if financial models suggest the investment is not wise. Behavioral finance https://www.investopedia.com/terms/b/behavioralfinance.asp https://www.investopedia.com/terms/b/behavioralfinance.asp Bounded rationality > Relationship to behavioral economics https://en.wikipedia.org/wiki/Bounded_rationality https://en.wikipedia.org/wiki/Bounded_rationality Perfectly rational decisions can be and are made without perfect information; bounded by the information available at the time. If we all had perfect information, there would be no entropy and no advantage; just lag and delay between credible reports and order entry. Information asymmetry https://en.wikipedia.org/wiki/Information_asymmetry https://en.wikipedia.org/wiki/Information_asymmetry Heed these words wisely: What foolish games! Always breaking my heart. https://deepmind.com/blog/game-theory-insights-asymmetric-multi-agent-games/ https://deepmind.com/blog/game-theory-insights-asymmetric-mu... > Asymmetric games also naturally model certain real-world scenarios such as automated auctions where buyers and sellers operate with different motivations. Our results give us new insights into these situations and reveal a surprisingly simple way to analyse them. While our interest is in how this theory applies to the interaction of multiple AI systems, we believe the results could also be of use in economics, evolutionary biology and empirical game theory among others. https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency > A Pareto improvement is a change to a different allocation that makes at least one individual or preference criterion better off without making any other individual or preference criterion worse off, given a certain initial allocation of goods among a set of individuals. An allocation is defined as "Pareto efficient" or "Pareto optimal" when no further Pareto improvements can be made, in which case we are assumed to have reached Pareto optimality. Which, I think, brings me to equitable availability of maximum superalgo efficiency and limits of real value creation in capital and commodities markets; which'll have to be a topic for a different day.
ggm 8y ago
No, I'm not sure. I have ill-informed opinions which go to bad economics and I'd probably be written out of the reddit economics conversation which has a special place in hell for amateurs like me. So.. I quoted the comment I commented on. What I feel here, is that small traders, at home traders, and people whose investments are managed arms-length by funds, are in a different place to people who operate "in" the market. And to some extent, these things which are driving significantly above longterm trend are things which the market regulator says it tries to limit: that whisper of future intent that three guys get in the mens room, and two women don't get in their other toilet, leads to a distorted outcome: the clients who benefit did not benefit from worked knowledge, they benefited from a point in time creating a distortion in who knew what to expect. The LIBOR people setting the prices for money who decided to listen to their chinese-walled banker friends and set company friendly price, did everyone a huge disservice, in the act of making some people fantastic outcomes predicated on different knowledge of the process. LIBOR was not setting information, it was a closed-room price fixing game.

westurner 8y ago

I was interested, so I did some research here. Rational Choice Theory https://en.wikipedia.org/wiki/Rational_choice_theory https://en.wikipedia.org/wiki/Rational_choice_theory Rational Behavior https://www.investopedia.com/terms/r/rational-behavior.asp https://www.investopedia.com/terms/r/rational-behavior.asp > Most mainstream academic economics theories are based on rational choice theory. > While most conventional economic theories assume rational behavior on the part of consumers and investors, behavioral finance is a field of study that substitutes the idea of “normal” people for perfectly rational ones. It allows for issues of psychology and emotion to enter the equation, understanding that these factors alter the actions of investors, and can lead to decisions that may not appear to be entirely rational or logical in nature. This can include making decisions based primarily on emotion, such as investing in a company for which the investor has positive feelings, even if financial models suggest the investment is not wise. Behavioral finance https://www.investopedia.com/terms/b/behavioralfinance.asp https://www.investopedia.com/terms/b/behavioralfinance.asp Bounded rationality > Relationship to behavioral economics https://en.wikipedia.org/wiki/Bounded_rationality https://en.wikipedia.org/wiki/Bounded_rationality Perfectly rational decisions can be and are made without perfect information; bounded by the information available at the time. If we all had perfect information, there would be no entropy and no advantage; just lag and delay between credible reports and order entry. Information asymmetry https://en.wikipedia.org/wiki/Information_asymmetry https://en.wikipedia.org/wiki/Information_asymmetry Heed these words wisely: What foolish games! Always breaking my heart. https://deepmind.com/blog/game-theory-insights-asymmetric-multi-agent-games/ https://deepmind.com/blog/game-theory-insights-asymmetric-mu... > Asymmetric games also naturally model certain real-world scenarios such as automated auctions where buyers and sellers operate with different motivations. Our results give us new insights into these situations and reveal a surprisingly simple way to analyse them. While our interest is in how this theory applies to the interaction of multiple AI systems, we believe the results could also be of use in economics, evolutionary biology and empirical game theory among others. https://en.wikipedia.org/wiki/Pareto_efficiency https://en.wikipedia.org/wiki/Pareto_efficiency > A Pareto improvement is a change to a different allocation that makes at least one individual or preference criterion better off without making any other individual or preference criterion worse off, given a certain initial allocation of goods among a set of individuals. An allocation is defined as "Pareto efficient" or "Pareto optimal" when no further Pareto improvements can be made, in which case we are assumed to have reached Pareto optimality. Which, I think, brings me to equitable availability of maximum superalgo efficiency and limits of real value creation in capital and commodities markets; which'll have to be a topic for a different day.

ggm 8y ago

No, I'm not sure. I have ill-informed opinions which go to bad economics and I'd probably be written out of the reddit economics conversation which has a special place in hell for amateurs like me. So.. I quoted the comment I commented on. What I feel here, is that small traders, at home traders, and people whose investments are managed arms-length by funds, are in a different place to people who operate "in" the market. And to some extent, these things which are driving significantly above longterm trend are things which the market regulator says it tries to limit: that whisper of future intent that three guys get in the mens room, and two women don't get in their other toilet, leads to a distorted outcome: the clients who benefit did not benefit from worked knowledge, they benefited from a point in time creating a distortion in who knew what to expect. The LIBOR people setting the prices for money who decided to listen to their chinese-walled banker friends and set company friendly price, did everyone a huge disservice, in the act of making some people fantastic outcomes predicated on different knowledge of the process. LIBOR was not setting information, it was a closed-room price fixing game.