Coase’s Theorem (not technically a theorem) provides the basis for putting numbers on things, it’s not arbitrary. The specific numbers criticized (1.3%, 7%) decided on by economists are indeed arbitrary, though.
The Ritual of Capitalization (2021)
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Re: The Ritual of Capitalization (2021)
#12A thing is only worth what someone is willing to pay for it. Valuation by formula is a pseudo science because every thing you do is ultimately subjective.
The formula allows you to compare. It is the same psuedo science as comparing SSD drive prices using storage capacity as a factor.
Re: The Ritual of Capitalization (2021)
#13Not convinced that an article which mentions religion more times than it mentions risk and doesn't mention growth expectations at all tells us very much...
You're missing the point of the essay actually. It's like complaining that an essay written by an atheist about church doesn't talk about sin and salvation.
No, I'm entirely getting the intended point of the essay, I just think that missing the 101 stuff makes the point that the author doesn't understand the subject matter he's attempting to do a hatchet job on.
Re: The Ritual of Capitalization (2021)
#14Earlier quoted context omitted.
It’s an educated guess, not the word of God. You don’t have to know it precisely to produce useful results. The entirety of physics is wrong, so what, it still allows us to build rockets, skyscrapers and computers.
And there's a wide variation between even two people on what that guess should be.
Fortunately, we have things called markets to allow the people that think something is overvalued to sell it to people who think it's undervalued...
Re: The Ritual of Capitalization (2021)
#15A thing is only worth what someone is willing to pay for it. Valuation by formula is a pseudo science because every thing you do is ultimately subjective.
What someone is willing to pay for something is very arbitrary and will be influenced by such pseudo science valuation formulas if they set the price first. Price anchoring as a form of a self fulfilling prophecy.
Diamonds are worth a fraction of what Debeers wants for them, but people still pay it because those are the only prices they've ever seen. On the other hand, printers are worth far more than they sell for, yet nobody would consider paying the actual price for them.
Re: The Ritual of Capitalization (2021)
#16Capitalism is closer to numerology or Kabbalah than ritual. The failure of the author to distinguish between different types of spiritual practices makes the entire article fall flat, which is sad because an investigation into the relationship between numerology and capitalism is quite interesting. Especially since you quickly discover that the number Zero holds special significance in accounting since all books must balance to it - assets and liabilities are equal.
Re: The Ritual of Capitalization (2021)
#17Earlier quoted context omitted.
Subjective things can’t be described by a formula?
Who knows what takes place in a person's mind? They may not be clear themselves. So, no, unlikely, unless or until the 'it' is objectified.
The unit of analysis is firms, not individuals.
My interest, at the halfway point through The Famous Article, is whether the relative sizes of the firms (in employees) fit in there somewhere.
Money is used as a sort of analytic "low common denominator" in all of this work, but that seems a narrow window for viewing life in general.
Re: The Ritual of Capitalization (2021)
#18An interesting read. The basic premise of juxtaposing an explicit religion with finance seems to be that the latter is an implicit religion.
Like the discount rate itself, this seems am arbitrary rhetorical choice.
I agree, at a very high level of abstraction, insofar as both a community of faith and finance are about rendering the future "somewhat predictable", though, in that sense, the future resembles the weather.
Re: The Ritual of Capitalization (2021)
#19Earlier quoted context omitted.
And there's a wide variation between even two people on what that guess should be.
Fortunately, we have things called markets to allow the people that think something is overvalued to sell it to people who think it's undervalued...
Markets ? Rituals ! Religion !
Re: The Ritual of Capitalization (2021)
#20It's sad that someone like the author would spend so much time avoiding understanding basic economics like subjective value, marginal value, voluntary exchanges etc. There are plenty of economics who never use any maths and help in understanding finance without resorting to this kind of silly critic