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Subject: Re: UKNM: More overvalued stocks
From: Steve Mynott
Date: Tue, 27 Jul 1999 17:01:57 +0100

On Fri, Jul 23, 1999 at 11:33:33AM +0100, Sean Phelan wrote:
> Hm.... "overvalued"... "overpriced"....
> Doesn't anybody believe in the theory of efficient markets any more?
> If you don't believe that markets are efficient today (ie market prices
> reflect all available information, discounted for risk, liquidity, etc),
> do you believe that markets have historically been efficient?

I don't think any economist has ever claimed this. Perfect competition
is a meaningless model, generally used by anti-market economists as
a straw man to attack pro-market economists.

The whole point of the market is that is based on incomplete information
and time. Given this the market is far more inefficient at producing
resources and distributing them through the price system than state
control can ever be.

> There is a vast body of research (and I mean real research by very smart
> people who can not only spell econometrics, but understand what it means
> and have spent entire PhDs and careers doing it) that supports the belief
> that markets have been efficient from 15th century Florence to the present
> day. The last two hundred year's sterling bond prices, for example,
> exhibited the behaviour predicted by today's asset pricing models, long
> before the models were created.

Econometrics is pseudo-science and lacks any predictive power whatever.

Economics is based on human action and choices and these cannot be
reduced to figures in a spreadsheet. If it rains today I am less likely
to buy goods from my local shops. How does that fit in an economic

> If markets were efficient in the past, before we had spreadsheets,
> mechanical calculators or even the telegraph to communicate information
> rapidly, can somebody PLEASE explain to me how we can POSSIBLY think that
> markets are now inefficient, and are unable to accurately reflect all the
> available information about a share price?

See any basic Keynesian influenced economics primer for numerous reasons
why this isn't the case. Since these are the beliefs such a text book
(wrongly) ascribe to market economists.

Knowledge is by its nature imperfect and markets are dynamic not static.

I guess all this stuff is off-topic anyway.

1024/D9C69DF9 steve mynott steveattightrope [dot] demon [dot] co [dot] uk http://www.pineal.com/

those who profess to favor freedom, and yet deprecate agitation, are
men who want rain without thunder and lightning. they want the ocean
without the roar of its many waters.
-- frederick douglass
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  Re: UKNM: More overvalued stocks, Clay Shirky

  Re: UKNM: More overvalued stocks, Sean Phelan

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