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> The actual nerdy economics joke there is in the second paragraph, which takes the form: Two economists are walking down the street. One of them sees a $20 bil
by jcdavis 6y ago
> The actual nerdy economics joke there is in the second paragraph, which takes the form: Two economists are walking down the street. One of them sees a $20 bill on the ground. As she bends to pick it up, her colleague says “don’t bother, if that was a real $20 bill someone would have picked it up by now.” She replies, “no see this was left here by a consumer tech startup trying to maximize user growth; their Monthly Active Picker-Upper numbers are doubling every two months.” She picks up the $20 bill and the startup raises money at a $2 billion valuation.
Matt Levine truly is a poet
- three_seagrass 6y agoI keep wishing he would do a podcast, even if it only released every two weeks.
- deleted 6y ago[deleted]
- blahbhthrow3748 6y agoThe Odd Lots podcast is very similar and Tracy and Joe are also very funny. Matt actually appears in a couple episodes (he has a really deep voice I didn't expect)
- duxup 6y agoIntended or not I like the line about "if that was a real $20" as sort of a subtext of how sometimes in economics you see predictions or explanations assuming people or businesses are somehow assumed to be logical. The $20 just couldn't be real because who would do that? But of course they do that and the expectation that being logical pays off or how we expect the market to work is all out the window.
- magicsmoke 6y agoEconomics is a post hoc explanation for how the market works. It's not like somebody came up with the theory of how a market should work and then built one, like you would a computer. Rather, markets existed back in the middle ages before economists did, increased the wealth of its participants, and economists later appeared to explain why that was the case. Nowhere is the prerequisite that this system is the result of logical design.
- mandelbrotwurst 6y agoYou're not wrong, but I don't think the person you're replying to is suggesting otherwise, they're just commenting on the assumption in many economic models that participants are rational actors that make logical decisions.
- jamesblonde 6y agoUtility maximizing decisions. The efficient markets 'hypothesis'
- deleted 6y ago[deleted]
- netcan 6y agoThis is one of those points that gets misrepresented and then straw manned way more often than not... like fiduciary duty to shareholders. Economists don't think people are always rational or logical.
- bobosha 6y agoEconomics, especially Behavioral economics, is Descriptive, not prescriptive.
- tomjakubowski 6y agoClassically (read: what I was taught in AP Econ 15 years ago), "normative economics", which is prescriptive and meant to inform policy, is divided from from "positive economics", which attempts to describe and rationalize economic activity. https://en.wikipedia.org/wiki/Normative_economics https://en.wikipedia.org/wiki/Normative_economics
- selimthegrim 6y agoSomeone should tell the MMT people that
- richk449 6y ago
- jstanley 6y agoThe bit about not picking up a $20 note because "somebody would have picked it up already" is a relatively common (half-joke) refutation of the efficient market hypothesis.
- duxup 6y agoAh, I kinda assumed it might be but I wasn't familiar with it. Thanks.
- dllthomas 6y agoWhich is appropriate because the efficient market hypothesis is half-refuted.
- amscanne 6y agoI don't think this it's a refutation of all. The efficient market hypothesis doesn't assume that the market is _perfect_ -- just that it has priced in all available information. When an arbitrage opportunity is noticed (i.e. the $20 bill on the ground) it will disappear quickly and ultimately be priced in the market. That's the efficient market hypothesis. That's what happens in the joke. Because of how quickly these are captured and priced in, the sentiment is that true arbitrage opportunities rare exist and aren't worth looking for. The joke is taking that to the logical extreme, but it doesn't make the general sentiment wrong.
- CPLX 6y ago> Because of how quickly these are captured and priced in, the sentiment is that true arbitrage opportunities rare exist and aren't worth looking for. The joke is taking that to the logical extreme, but it doesn't make the general sentiment wrong. Yes, it does. The EMH suggests that markets move extremely quickly to capture and price based on all available information, and that market disruptions and failures are temporary and mostly inconsequential. The real world suggests otherwise. As it turns out the concept of "perfect information" is literally ridiculous, because the concepts of all available information and rationality can't even really be defined in the context of a complex adaptive system, and when you look around the world you see examples of inefficient markets, unexploited arbitrage, sheer randomness, misplaced risk, and chaotic behavior or complex emergent properties all around you. The EMH proponent says oh that's not actually happening because it can't be happening because my theory says it can't, so there. Just like the person in the joke.
- the-dude 6y agoAre you aware it is a variant on a very old joke on Economics?
- K2L8M11N2 6y agoYeah, that's what makes it funny!
- Pmop 6y agoOn a funny note, I fed myself for 6 months with VC money iFood took.