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Economic theory makes some unsubstantiated assumptions, like consumers have information needed to make decisions, and those decisions are rational. In the real
by coliveira 1y ago
Economic theory makes some unsubstantiated assumptions, like consumers have information needed to make decisions, and those decisions are rational. In the real world the market is determined by external events that consumers have no way to know.
- WalterBright 1y ago"Risk" is the term for unknown information, and is priced in.
- coliveira 1y agoHow can they even price it if there is no model for (true instead of theoretical) risk?
- WalterBright 1y agoThings like credit scores, which are a systematic way to evaluate risk. The higher the credit score, the lower the interest rate you get charged. It's all about the risk. Insurance companies totally operate on evaluating and quantifying risk.