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This discussion came up recently in a Planet Money episode (http://www.npr.org/blogs/money/2011/05/20/136403092/the-tuesday-podcast-we-sold-gold http://www.npr.
by staticshock 15y ago
This discussion came up recently in a Planet Money episode (http://www.npr.org/blogs/money/2011/05/20/136403092/the-tuesday-podcast-we-sold-gold http://www.npr.org/blogs/money/2011/05/20/136403092/the-tues...).
They interviewed an economist who ran a simple experiment: he created a market for the students in his class with a VERY predictable security (it paid a pre-established dividend N times, and then stopped.) And yet speculative bubbles invariably formed and crashed.
- jturn 15y agoThat blew my mind. The professor even told the students it was happening as it was happening and the bubble wouldn't deflate.
- khafra 15y agoIt feels like it's similar to the "guess a number between 0 and 100 that's 2/3 of the average person's guess" game. In the real world, you don't win by doing the most rational thing; you win by succesfully modeling the other players.