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I 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 avai

I 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.
- amscanne 6y ago
  Of course there’s no “perfect information” (why quote something I didn’t say?), just available information. The sentiment is that arbitrage opportunities are rare and typically disappear before they can be exploited. Again, no one would claim that they don’t exist period — that’s the whole reason the joke is funny. Honestly, if you look around and see “unexploited arbitrage” then you should be wealthy. I don’t personally see many $100 bills as I walk around, to use the metaphor from the joke.
- perl4ever 6y ago
  I'm not sure if it contributes very much to discussion to say "markets are efficient!" or "no they aren't!". I often see interesting things that make me think simplistic ideas of market efficiency are wrong. But on the other hand, I never have seen a $20 bill on the ground that I can recall. Might be interesting to poll people and find out how many have.

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.

amscanne 6y ago
Of course there’s no “perfect information” (why quote something I didn’t say?), just available information. The sentiment is that arbitrage opportunities are rare and typically disappear before they can be exploited. Again, no one would claim that they don’t exist period — that’s the whole reason the joke is funny. Honestly, if you look around and see “unexploited arbitrage” then you should be wealthy. I don’t personally see many $100 bills as I walk around, to use the metaphor from the joke.
perl4ever 6y ago
I'm not sure if it contributes very much to discussion to say "markets are efficient!" or "no they aren't!". I often see interesting things that make me think simplistic ideas of market efficiency are wrong. But on the other hand, I never have seen a $20 bill on the ground that I can recall. Might be interesting to poll people and find out how many have.