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The implications are not significant..? the real world is messy enough that this will not ever apply.

• baq 4mo ago
  the abstract itself explains why there is a problem even if the real world is messy; markets are a social construct
• throwaway27448 4mo ago
  The fact that free markets don't exist, and that supply and demand is not a natural law that implies efficient markets has never stopped people acting like both are true and stuffing fingers in their ears. But, both free markets and supply/demand are useful enough concepts to talk loosely about processes to understand the interest that I'll enjoy digging into this.
  • peder 4mo ago
    They're not just useful concepts tho, they're how every business operates, and the concepts cover the vast majority of situations. The behavioral economics/Freakonomics thing was like "Hey, here's this thing that might if you squint real hard fall outside of efficient market theory" and then for a decade people took that to mean that that the base concepts were worthless, which was a severe overcorrection from people that didn't understand economics.
    • tsimionescu 4mo ago
      The vast majority of real world businesses create prices based on cost plus systems, not on supply/demand, which are generally impossible to measure directly. Another good chunk of smaller businesses simply copy the prices of larger businesses, at least in b2c markets. Sure, if their goods are not selling, they might reduce price, but they might try other tactics as well (marketing, targeted discounts, etc).
      • wrqvrwvq 4mo ago
        these "other tactics" are just attempts at increasing demand. Cost plus is how many business set prices but that is entirely separate from what the market decides. If cost plus is not an attractive price, it won't sell, because the demand is not there.
        • tsimionescu 4mo ago
          > If cost plus is not an attractive price, it won't sell, because the demand is not there. Sure, but that only sets a cap. The market might bear twice the initial price, but few businesses actually take the time in practice to explore things at this level
      • BobaFloutist 4mo ago
        I always thought of supply and demand as more defining a limit that the price approaches as the number of transactions and the size of the market approach infinity, barring structural obstacles or persistent information asymmetry to prevent it than as something that was supposed to happen immediately on any given transaction.
      • bryanlarsen 4mo ago
        Businesses generally follow the rule "price is set to whatever the market will bear". Which is just an indirect way of setting price by supply and demand.
    • dash2 4mo ago
      There are many ways that free and competitive markets can fail other than behavioural economics! Monopoly, informational asymmetry, externalities… All of these are plausibly pervasive.
    • wrqvrwvq 4mo ago
      Knowledge accumulation seems to have cyclical patterns where general observations are condensed into "laws", and common wisdom is to treat these as unassailable truths. As exceptions and contradictions are found, the popular wisdom is to entirely dismiss the overwhelming universal conformity with the earlier principles because it sounds smart to common people. A lot of normal people see the basic problems with most methodological maxims but are led to believe that the maxim is truth. It takes a podcaster with a "study" to then "debunk" the "myth" they were yesterday defending as unimpeachable. People are generally not well informed enough to know anything and the podcaster class is the worst imaginable vector for knowledge dissemination or popularization. Just clickbait garbage monkeys with foreign money and vicious antisocial tendencies.
    • WarmWash 4mo ago
      Economics is one of the scientific sore spots for liberal ideology. If you are liberal and mostly swim in liberal circles, you probably believe that economics is mostly bunk pseudoscience. Akin to conservatives and climate change
      • dinfinity 4mo ago
        To be fair, macroeconomics can hardly be called science, though. It is incredibly hard to falsify a lot of the theories given the lack of possibilities for experimentation. It is far closer to philosophy than to any of the even remotely hard sciences. Nothing to do with ideology, but with the nature of the field. Take epidemiological research in the areas of food and medicine: incredibly hard and expensive to get right and even then with often tenuous results. Now try doing that with ridiculously heterogeneous nations influenced by potentially almost everything on the planet. It's a small miracle that economists manage to get some useful insights out of the data, but we should definitely be aware of how weakly most of them are supported (don't start talking about "error bars" with economists).
        • WorldMaker 4mo ago
          An argument of the last couple of decades is that videogames have built incredible labs for macroeconomic experimentation. So far mostly what we learn are failure cases (mudflation, being such a big learning from videogames that the term itself is named after a type of them), but we are learning things (some of them exploitative, but that's a different ethical question).
          • dinfinity 4mo ago
            You are overstating this. Mudflation does not transfer to the real world well, if at all. Very few skill-capped bits of DLC for real world activities. These games do not include many of the complexities of the real world and can thus provide few insights that generalize to the real world on a macroeconomic level. They are toy universes. I'm not saying they are useless, far from it, but they are not "incredible labs for macroeconomic experimentation". Try determining the effect of raising the central bank interest rate within a game of your choice. Or changing the minimum wage. Or the effects of investing in education. Etc.
    • throwaway27448 4mo ago
      Well yes, market forces as theorized are the very premise we've structured our entire economy around. Or, more bluntly, the desire to purely encapsulate political-economic power in capital. How else could an economic process operate without being attacked by the state? But this is also why our market behaves so irrationally—these concepts have very obvious predictive limits that investors are struggling to grapple with and our politicians (and largely our electorate tbf) have blind faith in
• ratmeadow 4mo ago
  No bro you don't understand bro, supply and demand maths said capitalism is the only way forward bro and give me money now
• casey2 4mo ago
  The vast majority of cash transactions are fired by a computer model so the implication are significant. It goes a long way towards explaining why increasingly financialized countries aren't experiencing noticeable real world improvement while also becoming increasingly extractive.
  • wuschel 4mo ago
    Hmm. I am not so sure about that statement. There are many models at play in the market, not one model. What mechanistic patterns are driving those models that are falsified by this paper and lead to the outcome of increasingly extractive/stagnating economies?
• imtringued 4mo ago
  Neoclassical economics is based around the idea that markets are 100% efficient. If they are only 99% efficient the whole thing falls apart, because the standard defense of neoclassicals against exponentially growing defects in the economy is that they never happen in the first place. The moment you permit a 1% defect rate, the cascade starts and it is only a matter of time for things to go wrong.
  • throwawayqqq11 4mo ago
    Reminds me of the spiraling wealth gap as an outcome of markets.