If you get “unusually” poor from investments are you just “unlucky?”
This is where neoclassical models get you
You can make average returns, but you’ll never make above-market returns. To put it more bluntly, if you get unusually rich from investments, >>then you just got lucky.
you can never do X, but if you happen to do X then we call you Y !
Yes, abskebabs.
Don’t many investors claim that they make their money by identifying government distortions in the market?
impossible ! other investors would have already done that …
(tee hee!)
AJ, yes. If there was a publicly available model that made accurate predictions about stock market prices, then–get this–investors would apply the information, thus correcting the prices!
As absurd as that sounds, that is the point I am making!
There is an old joke, widely told among economists and one that I’ve already shared, about an economist strolling down the street with a companion when they come upon a $100 bill lying on the ground. As the companion reaches down to pick it up, the economist says “Don’t bother — if it were a real $100 bill, someone would have already picked it up.”
its funny because its absurd and makes a mockery of science.
you aren’t actually supposed to believe that there are literaly no $100 bills lying on the floor anywhere in the real world. this is what happens when you build a model to help you clarify your thinking, only it renders you completely unable to say anything that is not absurd.
we aren’t in equilibrium, there is only a tendency towards reaching it.
the tendency is not mechanical/automatic, it is the result of individual agents striving to profit under a regime of private property and competition.
Of course I believe there are dollars lying somewhere out there.
The point is that there are very few, they won’t last long, and it’s complete luck to stumble upon one!
if not complete luck, since my odds are better if i go and look at many floors than if i stay in bed
Okay, now imagine if millions of other people were looking. Some of them dedicating their entire working days to it. How are your chances?
That’s all I’m saying.
what you are saying is that you can sometimes be reasonable, and you can present your abstract models (thought experiments) as what they are, present with all their imperfections , qualifications, and with warnings of what should not be deduced to be true about the real world despite the seductiveness of the model.
but routinely you just say ‘we are in equilibrium now and always’. you aren’t being consistent.