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Markets are efficient if and only if P = NP (2010)

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Re: Markets are efficient if and only if P = NP (2010)

#121

Post by stult »

cimmanom wrote: post #101
yellowstuff wrote: post #99

Earlier quoted context omitted.

The efficient market theory is that all information, public and private, is incorporated into all stock prices at all times, so there's no point to researching companies to try to outperform the stock market. I don't think anyone believes it is literally true, just that it is a good model for most stocks most of the time. If everyone believed it then no one would bother to research stocks, and the markets would be le…

That's a far more limited claim. There's a very common claim that "markets are efficient". Extending to all markets all the time. Explaining why market based solutions are the best way to provide health care and education and other (arguably common) goods. But many markets (the labor market, the health care market, etc) work in such a way that it's ridiculous to assume that most participants know all public and priva…

The EMH is specific to asset markets. So stocks and bonds basically. No (respectable, well-known) economist has ever argued that all markets are always efficient.

Also what people mean when they say markets are efficient in other contexts means something very different. The EMH specifically describes how quickly and what kinds of information get incorporated into asset prices. It doesn't make claims about how markets organize production or optimize utility without centralized direction, which is usually what people mean when they say free markets are efficient.

I think a lot of confusion has arisen from the very general-sounding name of the hypothesis which does not reflect its relatively narrow claims. Not that I buy the EMH (no pun intended), but that's a different story.

Re: Markets are efficient if and only if P = NP (2010)

#122

Post by baursak »

Iv wrote: post #87
zwww wrote: post #84

Most people seem to read this as a proof that markets are inherently flawed and as lending support to their ideological distrust of market economies. I think that if the authors thesis holds true and p indeed != np, this kind of conclusion could spell an even bigger problem for those who advocate to agument or replace market economies with another, typically more centralized, form of economic calculation. Allende's c…

When I tried to read about Allende's cybersyn all I could find are a few retro-futuristic furniture, but no meat whatsoever about the kind of software that was behind. It looked like pure PR to me. Do you have good sources about it? It has always intrigued me. Personally I think it is very unlikely that the markets are close to the best approximation we can afford. The current market-making agents use limited intelli…

I'm interested in this. So far, the best resources I found are:

- "Red Plenty" by Francis Spufford, a mix of fiction and non-fiction about planning experience in the USSR. It includes a rich bibliography and references to papers published over the past 70 years around this issue.

- There are few papers by Chinese economists, most notably this one: https://boingboing.net/2017/09/14/platform-socialism.html (you have to mess around with Sci-Hub mirrors to get a free copy).

- There are few papers and books by Michael Ellman, e.g.: https://www.amazon.com/Planning-Problems-USSR-Contribution-M...

- I also have a few primers on linear programming in my to-do list, e.g.: https://www.amazon.com/gp/product/0486654915/

- Somewhat tangential, but "the greatest American capitalist" ripping into EMH is a fun read too: https://www8.gsb.columbia.edu/articles/columbia-business/sup...

None of these really talk about the software still, but I would imagine a combination of:

- existing supply-chain systems already in place at Amazon, Walmart, etc.,

- something along the lines of non-monetary Kickstarter to gauge popularity of ideas from the ground up, and encourage innovation

- strong democratic institutions

- still allow free market at low levels, like individual entrepreneurs that don't employ anybody (once you employ someone, it must be a co-op).

Dunno, these are just random ideas in my head. :)

Re: Markets are efficient if and only if P = NP (2010)

#123

Post by Bizarro »

SolarNet wrote: post #53
stale2002 wrote: post #47

Earlier quoted context omitted.

Equal number of people doesn't not solve the principle agent problem. The idea of the principle agent problem is that the best person who is able to understand their own wants and desires is the person themselves. Markets are currently the way that puts the maximum amount of control into each individuals own hands. IE, a person has X resources, and they can trade them how they like because they are best able to under…

> The idea of the principle agent problem is that the best person who is able to understand their own wants and desires is the person themselves. I don't see how markets are supposed to solve that when we allow countries with slaves to participate on the markets. Or landlords to exercise economic rent over the land that other people maintain and live on. I guess my point here is I'm not sure markets as we have them t…

I don't see how markets are supposed to solve that when we allow countries with slaves to participate on the markets.

The idea that the small number of countries with however many number of slaves distorts the markets is ludicrous.

Re: Markets are efficient if and only if P = NP (2010)

#124

Post by neffy »

ianai wrote: post #60
SolarNet wrote: post #20

Earlier quoted context omitted.

On two, as this appears to be a cross disciplinary paper, it's important to consider that some economists currently claim markets are efficient (the efficient market hypothesis, which is like a big open question in economics). By drawing a link between the EMH and P=NP (which many computer scientists believe is unlikely) the author is linking two open questions with opposing beliefs. So I think point two is sort of a…

I don’t think economists claim markets are efficient. There’s far too many examples to the contrary - see amazon, wellsfargo, and Verizon as examples. While those companies do technically have competition, they operate with significant market power. Also, I once heard an Econ explain EH as “true if enough people operate under the assumption that it is not true” Edit-After waking up a little more, I’m not entirely sur…

The strong form of the efficient market theory is fairly well discredited by now, and there are much easier way to disprove it in any case than this.

Re: Markets are efficient if and only if P = NP (2010)

#125

Post by [deleted] »

n4r9 wrote: post #91
ayepif wrote: post #86

Earlier quoted context omitted.

Maybe I'm being super pedantic and possibly confrontational (I apologise in advance) but it jumped out on me here. I think you've misunderstood the 'famous elementary proof' that there are infinite primes. You do not create a new prime as you have suggested (quoted below). "Multiply them together and add one. No prime divides the new number (because "every" prime leaves a remainder 1), so you've just produced a new p…

You're entirely correct. A very ironic mistake/misunderstanding for the parent post to make. Edit: I've thought about this a bit more, and you can save the parent post by prepending a result like "Every number larger than one is either prime, or divisible by a prime smaller than itself". In this case you can then assert that your constructed number is prime. However, this result requires its own proof and was not men…

[deleted]

Re: Markets are efficient if and only if P = NP (2010)

#126

Post by wz1000 »

Iv wrote: post #87
zwww wrote: post #84

Most people seem to read this as a proof that markets are inherently flawed and as lending support to their ideological distrust of market economies. I think that if the authors thesis holds true and p indeed != np, this kind of conclusion could spell an even bigger problem for those who advocate to agument or replace market economies with another, typically more centralized, form of economic calculation. Allende's c…

When I tried to read about Allende's cybersyn all I could find are a few retro-futuristic furniture, but no meat whatsoever about the kind of software that was behind. It looked like pure PR to me. Do you have good sources about it? It has always intrigued me. Personally I think it is very unlikely that the markets are close to the best approximation we can afford. The current market-making agents use limited intelli…

Paul Cockshott has written a bunch of literature on this:

http://www.dcs.gla.ac.uk/%7Ewpc/reports/index.html#econ

Re: Markets are efficient if and only if P = NP (2010)

#127

Post by naasking »

em70 wrote: post #113

This paper is rubbish. Trading is ultimately a partial information, sequential game with an unknown number of participants whose payoff functions (and utilities) are also unknown. Could the market be closer to being efficient if P=NP? Likely. Does P=NP imply efficiency? Not at all.

You seem to be missing the point. Markets were and possibly still are widely considered weak-form efficient. This is a disproof of that conjecture by showing an inherent contradiction between widely believed properties, ie. P!=NP and markets are weak-form efficient, therefore at least one of them is false.

Edit: "Does P=NP imply efficiency? Not at all." This isn't even a claim of the paper. The paper is claiming the opposite, that market efficiency is true only if P=NP.

Re: Markets are efficient if and only if P = NP (2010)

#128

Post by simias »

zeth___ wrote: post #79
csomar wrote: post #73

Earlier quoted context omitted.

> Have another account here but don't want to take the karma hit for being a crank. Stop worrying about karma and what some random dudes think about you/your comments on HN or whatever online board. If you think it is wrong simply don't do it.

You get silenced by karma when you have unpopular opinions. You know, just how people used to tell homosexuals to not be gay when other people thought they were freaks because of it.

Individual comments effectively get silenced (or at least buried) by downvoting, changing the account you post with won't change that. You can get an account shadowbanned however which does reduce the visibility of all its comments but that's a different issue, I don't think you can trigger a shadowban automatically by downvotes alone (or maybe only in extreme cases).

Re: Markets are efficient if and only if P = NP (2010)

#129

Post by psergeant »

js8 wrote: post #117
psergeant wrote: post #93

Earlier quoted context omitted.

> Frankly, everybody with a bit of economic common sense knows Citation? True Scotsman fallacy?

I gave a citation. When I say "everybody with a bit of economic common sense", I mean everybody in economic profession who is able of some elementary reflection on what they are doing. Even most neoclassicals (which is probably the only school where somebody actually believes in EMH) know that many of the theoretical assumptions are bullshit. Another classic example, aside from EMH, is SMD theorem. I am pretty sure t…

You gave a link to a popsci book whose Wikipedia Criticism section is ... unforgiving and relentless.

You then double down on your True Scotsman fallacy, mae a sweeping unsupported claim about a nebulous group of people, and follow it up with another conjecture about another group in an attempt to appeal to authority.

We can do better than this.

Re: Markets are efficient if and only if P = NP (2010)

#130

Post by Symmetry »

I don't think anybody would claim that even the weak form of the EMH applies in all cases. Like the idea that objects of different weights fall at the same speed it's an approximation that can be very close to true in some cases but can be badly misleading in others. If you've ever listened to economists talk about prediction markets they always seem to bring up the idea that markets with low capitalization have low efficiency.

And even looking at the highly capitalized stock market I know at least one story of a major player that got its start noticing a violation of weak-form efficiency and becoming very rich by fixing the violation.

There's no reason to think that actual markets are now finally efficient and in fact there are some that are publicly know, but which only bring a small return and require decades of investment to fix so nobody is interested in trying.

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