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> High risk, high reward. Which usually means no trade because for many transactions, the required sufficiently high reward would outweigh the intended gains.
by gwern 3y ago
> High risk, high reward.
Which usually means no trade because for many transactions, the required sufficiently high reward would outweigh the intended gains. So you get deadweight loss. Think of a lemon market for used cars. Yes, there will still be some transactions for cars which look like a sufficiently astounding bargain, but overall, both buyers and sellers are much worse off.
- alephnerd 3y agoThe world isn't as rational as your blog tries to make it. Some people (not me) are fine with taking the risk, or have additional aces up their sleeves. Corruption works thanks to information asymmetry. In other cases, this is (sadly) just standard operating procedure.
- gwern 3y agoTell me that when Nigeria gets as rich per capita as countries which do have good rule of law. (I'll wait.)