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Fair, "rational" is a thorny term in general. I suppose it's easier to invert the proposition, that it is not obviously irrational: one can have complete inform

Fair, "rational" is a thorny term in general. I suppose it's easier to invert the proposition, that it is not obviously irrational: one can have complete information, and be of sound mind, and yet still choose to buy into a tulip bubble, knowing that that individual transaction's externality might only contribute 0.00...1% to the inevitable crash (or wealth extraction, if one wants to frame it that way).

H8crilA 5y ago
You seem to be mixing externalities with personal gain here. It is obviously "rational" (as in you'll be better off) to add fuel to the fire if you know reasonably well when to pull back and book profits, then move on to the next thing. It just happens at the expense of others. Hence my question - define "rational", then we can decide what is and isn't "rational". The moral/legal concensus of the current era is that "everything is allowed by default, unless it gets so obviously bad that we ban it" (blacklisting). This wasn't always the case (though it usually was the case), for example the Soviet countries had a list of all possible agreements, and you couldn't make anything outside of this list (whitelisting).
- lukifer 5y ago
  Thank you for clarifying. I'm assuming (without endorsing) the "capitalist realism" and "rational self-interest" Overton Window of the industrialized West. I suppose what I'm pushing back against, is the conventional story that tulip bubbles are purely a sucker's game: a belief that "a fool and their money are soon parted" (and the follow-on belief that they deserve to!). There are indeed low-information investors, quasi-gambling-addictions, true believers, etc; but I think we underestimate the game-theoretic trap of zero-sum speculative bubbles, if we merely scoff at the "suckers" buying into beanie babies, or NFT jpegs, or whatever the next thing ends up being.
  - H8crilA 5y ago
    The thing is that in practice the vast majority ends up down, always, and I mean always. Maybe not completely rekd (people do have some sense of danger) but surely down. This is one of the (valid) arguments used by indexers, the vast majority of individual trading portfolios end up with negative returns. Also corroborated by many stories from successful traders, they usually blew up a few accounts before they figured out something that actually has an edge. OTOH if you're a young zoomer it really doesn't matter if you blow up your (larger) lunch money.

H8crilA 5y ago

You seem to be mixing externalities with personal gain here. It is obviously "rational" (as in you'll be better off) to add fuel to the fire if you know reasonably well when to pull back and book profits, then move on to the next thing. It just happens at the expense of others. Hence my question - define "rational", then we can decide what is and isn't "rational". The moral/legal concensus of the current era is that "everything is allowed by default, unless it gets so obviously bad that we ban it" (blacklisting). This wasn't always the case (though it usually was the case), for example the Soviet countries had a list of all possible agreements, and you couldn't make anything outside of this list (whitelisting).

lukifer 5y ago
Thank you for clarifying. I'm assuming (without endorsing) the "capitalist realism" and "rational self-interest" Overton Window of the industrialized West. I suppose what I'm pushing back against, is the conventional story that tulip bubbles are purely a sucker's game: a belief that "a fool and their money are soon parted" (and the follow-on belief that they deserve to!). There are indeed low-information investors, quasi-gambling-addictions, true believers, etc; but I think we underestimate the game-theoretic trap of zero-sum speculative bubbles, if we merely scoff at the "suckers" buying into beanie babies, or NFT jpegs, or whatever the next thing ends up being.
- H8crilA 5y ago
  The thing is that in practice the vast majority ends up down, always, and I mean always. Maybe not completely rekd (people do have some sense of danger) but surely down. This is one of the (valid) arguments used by indexers, the vast majority of individual trading portfolios end up with negative returns. Also corroborated by many stories from successful traders, they usually blew up a few accounts before they figured out something that actually has an edge. OTOH if you're a young zoomer it really doesn't matter if you blow up your (larger) lunch money.