Markets are efficient if and only if P = NP (2010) • Hacker News Board

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

#191

Post by Iv » Sat, Jun 02, 2018, 6:35 AM UTC

wahern wrote: post #177

Iv wrote: post #87

Earlier quoted context omitted.

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…

The only book discussing the history of Project Cybersyn is, I think, Cybernetic Revolutionaries: Technology and Politics in Allende's Chile by Eden Medina. ( https://www.amazon.com/dp/B006NY5426 ) Here's my Amazon review: https://www.amazon.com/gp/customer-reviews/R1IBPD2HGZ6UVA/ The project was very short-lived, but (IIRC) the primary designer was Stafford Beer ( https://en.wikipedia.org/wiki/Stafford_Beer ) who ba…

Thanks!

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

#192

Post by psergeant » Sat, Jun 02, 2018, 8:24 AM UTC

js8 wrote: post #141

psergeant wrote: post #129

Earlier quoted context omitted.

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.

So do better! Find me an economist who truly believes in EMH and is either not a neoclassical (that's about half of all economists) or makes some real-world economic decisions (like in a central bank) or has expressed his belief in support of EMH after 2008 crash. I gave you two Nobel prize recipients who actually wrote famous articles explicitly outlining market inefficiencies. Regarding Steve Keen, I don't have my…

The product description for the book you quoted:

> Debunking Economics exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong.

Plainly alludes to the fact that the book is not mainstream economic theory. People arguing for minority views of complex subjects find — rightly — that the burden of proof is on them, and not the other way around.

Related: it’s not in the least bit surprising to see the book make an appeal to common sense over “those experts”. Truly we live in the age of Trump and Farage.

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

#193

Post by speedplane » Sat, Jun 02, 2018, 8:36 AM UTC

yellowstuff wrote: post #99

ianai wrote: post #60

Earlier quoted context omitted.

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 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…

So called "Perfect Information", as you point out, is an important requirement of the efficient market hypothesis, but not the only one. It also requires fungible goods (e.g., if I start making bicycles that are better and cheaper than your bicycles, they will necessarily sell more. That's often not the case, especially if there is strong branding).

Another requirement is that entrepreneurs have fair market access to capital. This assumption is true in many developed countries, but not in many developing countries where you need connections to obtain a loan. But even in developed countries, it's difficult to get extremely large loans on the merits of the financials alone, which explains why large infrastructure projects like highways, airports, and power-plants often don't get built solely by the private sector.

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

#194

Post by speedplane » Sat, Jun 02, 2018, 8:40 AM UTC

sshine wrote: post #81

ianai wrote: post #60

Earlier quoted context omitted.

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 "true if enough people operate under the assumption that it is not true" is funny and somewhat intuitive: If you know markets are efficient, there is no reason to haggle about the price. But haggling is the mechanism that enhances price efficiency.

In a truly efficient market, you wouldn't need to haggle about the price. You would have a slew of options that you could choose from, and would choose the option that best fits your demand. In an efficient market, if you were ever being overcharged by a company, another company would pop up overnight, and you would immediately switch from one to the other. No haggling required, just knowledge of what's available and easy movement from one option to another.

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

#195

Post by js8 » Sat, Jun 02, 2018, 8:43 AM UTC

psergeant wrote: post #192

js8 wrote: post #141

Earlier quoted context omitted.

So do better! Find me an economist who truly believes in EMH and is either not a neoclassical (that's about half of all economists) or makes some real-world economic decisions (like in a central bank) or has expressed his belief in support of EMH after 2008 crash. I gave you two Nobel prize recipients who actually wrote famous articles explicitly outlining market inefficiencies. Regarding Steve Keen, I don't have my…

The product description for the book you quoted: > Debunking Economics exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong. Plainly alludes to the fact that the book is not mainstream economic theory. People arguing for minority views of complex subjects find — rightly — that the burden of proof is on them…

And Sharpe and Fama, which he quotes expressing doubts about empirical validity of EMH, are mainstream?

But you can only lead horse to a water..

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

#196

Post by heavenlyblue » Sat, Jun 02, 2018, 4:22 PM UTC

bluGill wrote: post #154

heavenlyblue wrote: post #144

Earlier quoted context omitted.

EMH is supported by the existence of Index Funds. So the truth of EMH depends on any point in time where the answer to the question of "Do Index Funds on average earn more than Private Funds?" is yes. It's not even binary and is not a static property, just like our laws are just a proxy to a question of what is ethical or moral; and the truth of their purpose is entirely based on the historical context.

Not really. Index funds depend on the markets being efficient enough that the cost of finding the inefficiencies is higher than the gain from finding them. The more people who blindly invest in markets, the less efficient the market is in reality, and the more possible gain for those who do research. Note that I said "people invest in markets", and not index funds above. There is a subtle differences, modern index fu…

What I am saying is that the definition of an inefficiency in the market is the information that only a closed subset of the market has access to.

Let's take an example: China. While they keep the image of a purely capitalist environment, every company above a certain size is expected to have some sort of government control. That would be the inefficiency of that market, because at that point people stop making decisions based on what the company wants but rather what government wants. You can't have open access to the strategic planning by the government.

Besides, you're clearly trying to argue definitions rather than trying to take a step back and realising that I am arguing abstracts rather than specifics in the first place. In other words - what you're saying isn't denying what I said; it's just embodying the concepts in the real world.

For example: _any_ true real-life index fund would always need to trade at a certain point, and that has to be done by someone. So yes - an index fund is just a "glorified" version of a private fund; because people are still managing it at a certain point. But the reason it still makes money is because markets are efficient.

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

#197

Post by throwaway37585 » Sat, Jun 02, 2018, 10:04 PM UTC

SolarNet wrote: post #45

stale2002 wrote: post #41

Earlier quoted context omitted.

In economics, the difference between "efficient market" and "epsilon away from efficient" is very little. IE, it is almost as good. So sure, maybe the market isn't 100% efficient. Maybe it is instead 99.99999% efficient, and that's good enough. Or in other words, The author of the paper is trying to be clever, and in the process he kinda misses the point of why the efficent market hypothesis is important to begin wit…

Sure, but significant facts come out of it: * Economic systems are optimization algorithms on an NP hard problem. Hence markets have no special efficiency capabilities, they are simply a choice of optimization algorithm, there may be better ones out there with more favorable properties. Any optimization algorithm with similar resources could have effectively equivalent efficiency. This destroys the economic calculati…

> You can't make even that kind of guarantee in the face of NP hardness.

You can. https://en.m.wikipedia.org/wiki/Polynomial-time_approximatio...

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

#198

Post by SolarNet » Tue, Jun 05, 2018, 2:20 AM UTC

throwaway37585 wrote: post #197

SolarNet wrote: post #45

Earlier quoted context omitted.

Sure, but significant facts come out of it: * Economic systems are optimization algorithms on an NP hard problem. Hence markets have no special efficiency capabilities, they are simply a choice of optimization algorithm, there may be better ones out there with more favorable properties. Any optimization algorithm with similar resources could have effectively equivalent efficiency. This destroys the economic calculati…

> You can't make even that kind of guarantee in the face of NP hardness. You can. https://en.m.wikipedia.org/wiki/Polynomial-time_approximatio...

Not in the face of generic NP hardness. From your own link, even NP completeness is not enough.

> Any strongly NP-hard [which may include strongly NP-complete] optimization problem with a polynomially bounded objective function cannot have an FPTAS unless P=NP

I was criticizing someone for claiming the author's work is pointless. The author's work is an attempt to find a complexity class for markets (and the problem they solve). If we know the complexity class then maybe there is a PTAS. But without the author's work you can't begin to claim there is an epsilon.

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

#199

Post by sethrin » Tue, Jun 05, 2018, 4:36 AM UTC

js8 wrote: post #195

psergeant wrote: post #192

Earlier quoted context omitted.

The product description for the book you quoted: > Debunking Economics exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong. Plainly alludes to the fact that the book is not mainstream economic theory. People arguing for minority views of complex subjects find — rightly — that the burden of proof is on them…

And Sharpe and Fama, which he quotes expressing doubts about empirical validity of EMH, are mainstream? But you can only lead horse to a water..

What's your opinion on Mandelbrot?

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

#200

Post by throwaway37585 » Tue, Jun 05, 2018, 3:04 PM UTC

SolarNet wrote: post #198

throwaway37585 wrote: post #197

Earlier quoted context omitted.

> You can't make even that kind of guarantee in the face of NP hardness. You can. https://en.m.wikipedia.org/wiki/Polynomial-time_approximatio...

Not in the face of generic NP hardness. From your own link, even NP completeness is not enough. > Any strongly NP-hard [which may include strongly NP-complete] optimization problem with a polynomially bounded objective function cannot have an FPTAS unless P=NP I was criticizing someone for claiming the author's work is pointless. The author's work is an attempt to find a complexity class for markets (and the problem…

Right, but your statement was about NP hardness in general.