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Markets are competitive if and only if P != NP

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Re: Markets are competitive if and only if P != NP

#141

Post by WorldMaker »

WarmWash wrote: post #122
peder wrote: post #95

Earlier quoted context omitted.

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 peopl…

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

I've been picking up a different feeling that economics is sort of in a pre-calculus moment that conservatives/libertarians and liberals/progressives have sort of been building two different sciences of economics and are missing the "calculus" to reunite them (or at least choose the winner between them).

I mention calculus specifically because it does feel like more of the progressive movements in economics are focused on rate of change rather than point in time. I personally often tend to get into electrical circuit analogies that current/resistance/impedance are more useful than steady state voltage. I find I especially bring these metaphors up a lot when discussing cryptocurrencies (and why I distrust them: inflation/deflation is the wrong axis, in my opinion, some inflation is a useful sign of "impedance" in the circuit, the trick to a healthy economy is not "deflationary" [most of real world history states that the deflationary economies are the worst to live in] but carefully managing the rate of change of inflation).

That progressive science of economics is happening, slowly (this paper seems relevant), but so much of conservative discussions get trapped in (misreads of) Adam Smith still. From a progressive point of view it does seem easy to dismiss conservative views of economics as bunk pseudoscience if they begin and nearly always end with Adam Smith, ignore some of Adam Smith's own warnings (for instance, relevant to above conversation: Adam Smith was also often the first to admit that the "free market" is an ideal/a model and unlikely to ever be a reality because humans are messy and ultimately irrational as individuals), and also ignore centuries worth of work since then, especially a lot of the "pre-calculus" stuff.

Re: Markets are competitive if and only if P != NP

#142

Post by WorldMaker »

dinfinity wrote: post #129
WarmWash wrote: post #122

Earlier quoted context omitted.

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

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 rig…

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).

Re: Markets are competitive if and only if P != NP

#143

Post by bryanlarsen »

tsimionescu wrote: post #110
peder wrote: post #95

Earlier quoted context omitted.

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 peopl…

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).

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.

Re: Markets are competitive if and only if P != NP

#144

Post by brunoborges »

ladberg wrote: post #125
stouset wrote: post #71

Earlier quoted context omitted.

The argument is not that you get better prices, it’s that you get accurate prices. First, this definition has always been circular: what’s the most accurate price? The one the market comes up with. More market, more accuracy! Second, there is never any reconciliation of the costs society is saddled with in order to chase arbitrarily more accurate prices, the most obvious of which is the massive quantity of fat skimme…

> First, this definition has always been circular: what’s the most accurate price? The one the market comes up with. More market, more accuracy! Market makers and HFT don't determine price: price is usually purely determined by the net inflows and outflows as decided by humans. MMs just smooth it out over time so everyone gets good pricing at the time and in the size they want it. > Second, there is never any reconci…

> price is usually purely determined by the net inflows and outflows as decided by humans.

"as decided by humans", more than 90% of trades are led by bots, so no, price is not being determined by humans.

In fact, we have seen time and again how some weird companies get a huge inflow of purchases simply because of bots misinterpreting news articles.

Re: Markets are competitive if and only if P != NP

#145

Post by ladberg »

brunoborges wrote: post #144
ladberg wrote: post #125

Earlier quoted context omitted.

> First, this definition has always been circular: what’s the most accurate price? The one the market comes up with. More market, more accuracy! Market makers and HFT don't determine price: price is usually purely determined by the net inflows and outflows as decided by humans. MMs just smooth it out over time so everyone gets good pricing at the time and in the size they want it. > Second, there is never any reconci…

> price is usually purely determined by the net inflows and outflows as decided by humans. "as decided by humans", more than 90% of trades are led by bots, so no, price is not being determined by humans. In fact, we have seen time and again how some weird companies get a huge inflow of purchases simply because of bots misinterpreting news articles.

It feels like you're intentionally omitting parts of what I said to make a point, and that I have no hope of correcting your world view, so just gonna clarify for any onlookers then stop arguing further.

> > price is usually purely determined by the net inflows and outflows as decided by humans.

> "as decided by humans", more than 90% of trades are led by bots, so no, price is not being determined by humans.

You skipped past the "MMs just smooth it out over time so everyone gets good pricing at the time and in the size they want it" right afterwards which exactly explains why most trading is between bots! Person A wants to buy 10 shares of Y at time T1, Person B wants to sell 20 shares of Y at time T2, Person C wants to buy 10 shares of Y at time T3. Those are all at different times, therefore bots have to take the other side of each trade, then trade with each other to smooth out prices in between each point.

> In fact, we have seen time and again how some weird companies get a huge inflow of purchases simply because of bots misinterpreting news articles.

I actually clearly see this happening more with humans than with bots. Can you think of a single example attributed to bots? A bot that can misinterpret a news article and lose money is fixed and/or disabled forever. There is no shortage of dumb humans willing to lose money due to a lack of literacy.

Re: Markets are competitive if and only if P != NP

#146

Post by tsimionescu »

wrqvrwvq wrote: post #119
tsimionescu wrote: post #110

Earlier quoted context omitted.

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).

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.

> 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

Re: Markets are competitive if and only if P != NP

#147

Post by stymaar »

throwaway27448 wrote: post #140
stymaar wrote: post #134

Earlier quoted context omitted.

In fact that there's both a liberal and conservative economics ideology, and what could form a scientific discipline in between is unfortunately cornered and sorely lacking visibility.

The distinction between liberal and conservative political labeling in america is entirely cultural. There is precisely zero ideological, ie political-economic, difference. It's just culture wars all the way down while we get pickpocketed together.

I see what you mean, but I'd disagree with the idea that there's “precisely zero ideological, ie political-economic, difference”.

That's true that since at least Clinton, the Democrats as a political party have mostly embraced the business-friendly view that is also the conservatives' position on the subject.

But the Democrat's leadership are only a (very) imperfect mirror of their electorate and of the intellectual left, and there is definitely a significant set of left-wing economists (Polanyi, Stiglitz, Piketti to name a few of the most prominent, in chronological order).

You can't look at Cochrane and Piketti and say there's no progressive vs conservatives divide in economics.

Re: Markets are competitive if and only if P != NP

#148

Post by throwaway27448 »

stymaar wrote: post #147
throwaway27448 wrote: post #140

Earlier quoted context omitted.

The distinction between liberal and conservative political labeling in america is entirely cultural. There is precisely zero ideological, ie political-economic, difference. It's just culture wars all the way down while we get pickpocketed together.

I see what you mean, but I'd disagree with the idea that there's “precisely zero ideological, ie political-economic, difference”. That's true that since at least Clinton, the Democrats as a political party have mostly embraced the business-friendly view that is also the conservatives' position on the subject. But the Democrat's leadership are only a (very) imperfect mirror of their electorate and of the intellectual…

I don't think that Piketty himself would say his views are well-represented by either party; but he does posit an ideological divide: http://piketty.pse.ens.fr/files/Piketty2018.pdf

I was being deliberately facetious, I suppose, but because of our campaign finance problems any policy of major economic import has coordinated bipartisan pressure.

Re: Markets are competitive if and only if P != NP

#150

Post by [deleted] »

j05ev1f3 wrote: post #131
dreambuffer wrote: post #113

Earlier quoted context omitted.

But you can just give computers to each of those millions of people and propagate the information, instead of having less reliable humans doing it? That's kind of what's already happening.

The problem isn't transmitting information, it's how the knowledge is created. Some information only exists in peoples head until they act on it. Sometimes they don't even know it themselves until they're forced to make a decision.

[deleted]
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