Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Ritual of Capitalization (2021)

economicsfromthetopdown.com

Post reply on HN
Print view View original

51–58 of 58 posts

Re: The Ritual of Capitalization (2021)

#51

Post by patrickscoleman »

I don’t disagree that property value is a ritualized social fiction, but there are some glaring errors in this.

Namely they define value = future earnings / discount rate, and then when showing the example with Amazon use past earnings.

Clarification: typically[1] future earnings = sum of all future cash flows, which is different than profits. Businesses (or a music catalog) keep making money and don’t just pay out once.

It’s an arbitrary formula too, but they’re not staying consistent with their arbitrary formulas.

And there is some effort to find a mathematical basis for the discount rate, e.g. CAPM [2]. Actual asset prices often are inconsistent with this and other models of the discount rate. Lots of hand wringing ensues and nobel prizes in economics are dolled out.

[1] https://en.m.wikipedia.org/wiki/Discounted_cash_flow [2] https://en.m.wikipedia.org/wiki/Capital_asset_pricing_model

Re: The Ritual of Capitalization (2021)

#52

Post by skybrian »

imtringued wrote: post #22
ttoinou wrote: post #20

It'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

I don't know how you can prove the existence of voluntary exchange in the real world. Also neoclassical economics tends to get marginal cost structures completely wrong. When you ask them, companies report constant or falling marginal cost. The text book authors that do the study then proceed to teach their students that marginal cost must rise. I am not sure I should trust people like that. If they are willing to st…

Another way to think about it is that prices come from a game where one player wants the number to be higher and the other wants it to be lower, and the players can walk away. That's a voluntary exchange.

I don't know why you think the existence of this game needs to be proven when it's a game people play all the time? It's very unlikely that you've never shopped for anything.

Not every purchase is entirely voluntary. Some purchases happen under pressure. The amount of pressure varies quite a bit.

Re: The Ritual of Capitalization (2021)

#53

Post by pessimizer »

FrustratedMonky wrote: post #24
imtringued wrote: post #22

Earlier quoted context omitted.

I don't know how you can prove the existence of voluntary exchange in the real world. Also neoclassical economics tends to get marginal cost structures completely wrong. When you ask them, companies report constant or falling marginal cost. The text book authors that do the study then proceed to teach their students that marginal cost must rise. I am not sure I should trust people like that. If they are willing to st…

You had me for 2 paragraphs. But claiming that a branch of economics is trying to implement communism but somehow hide in plain sight, is a real stretch. Like a giant leap over the grand canyon stretch. Is there anything to this argument? I really would like to know. I read a recent theory that late stage capitalism does naturally morph into socialism, as a way for the rich to quell dissent in the poor. But not sure…

> But claiming that a branch of economics is trying to implement communism but somehow hide in plain sight, is a real stretch.

I think it's usually called corporatism, or literally called fascism (the Italian version, not whatever liberal Democrats mean when they say it.)

For me, the test hypothetical is how one would like literal chattel slavery if laws and diligent inspections limited slave work hours to 6 hours a day with a max of 24 hours a week, slave quarters looked like fancy college dorms, families were given the right to stay together, and slaves all had iPhones and Netflix. If slavery starts to sound more appealing, you might lean towards corporatism or national syndicalism.

Re: The Ritual of Capitalization (2021)

#54

Post by marcosdumay »

imtringued wrote: post #22
ttoinou wrote: post #20

It'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

I don't know how you can prove the existence of voluntary exchange in the real world. Also neoclassical economics tends to get marginal cost structures completely wrong. When you ask them, companies report constant or falling marginal cost. The text book authors that do the study then proceed to teach their students that marginal cost must rise. I am not sure I should trust people like that. If they are willing to st…

> I don't know how you can prove the existence of voluntary exchange in the real world.

You mean that in a "what is free will anyway" form? Or is there something definable that you contest?

> The "obvious" conclusions you can derive from a continuous neoclassical model make no sense the moment you add multiple goods because at that point you now need to run NP hard optimization algorithms to get an equivalent answer.

I don't think many economists would disagree with that equivalence. They seem to always hint very strongly at it, but never actually articulate it. Exactly why do you think it's a problem?

Overall, I have some strong criticism of modern economics. You seem to be bothered by the same kind of thing, but I can only sympathize with your complaint about continuous models.

Re: The Ritual of Capitalization (2021)

#55

Post by suoduandao2 »

FrustratedMonky wrote: post #27

I wish there were more books or studies on how Economics is really a form of Psychology. It seems like the economic theories that delve into why humans do what they do seem more 'real', or uncovering something about human nature that can be applied.

given how hard it is to replicate studies in Psychology, maybe the 'rational economic actor' theory, while obviously wrong, still makes better predictions that any theory that more accurately models the humans involved? After all, one of the main things that makes real humans different from rational actors is our unpredictability.

Re: The Ritual of Capitalization (2021)

#57

Post by littlestymaar »

golergka wrote: post #49
littlestymaar wrote: post #25

Earlier quoted context omitted.

Except that “risks and inventives” aren't laws of physics, they are pieces of the dogma (and worshipers dont usually see the difference between the later and the former: it is the essence of religion to believe the dogma as if it was some kind of transcendantal law)

All of these concepts have predictive power that is proven with hard data every day. And unlike physics, it's one of the most democratic realms of knowledge: if you think that these predictions are wrong, you can make yourself a lot of money.

> All of these concepts have predictive power that is proven with hard data every day

Citation needed™

> if you think that these predictions are wrong, you can make yourself a lot of money.

The market can remain irrational much longer than you can demain solvent

As Keynes summarized it in his “beauty contest” thought experiment, it's not about getting the “real” price that matters, it's about guessing what price the group is going to assign. Being “right” against the crowd gives you no point.

For one person getting away with the big short, there are a thousand that just miss the timing of the crash even though they were right on the underlying analysis.

Re: The Ritual of Capitalization (2021)

#58

Post by HDMI_Cable »

i thought this was going to be a post about *capitalization*—i.e., it was going to be about uppercase characters. when you think about it, capital letters are entirely useless since they don't convey any information in regular text, unless you're writing in ALL CAPS.

you can get away just fine writing in all lowercase characters, as i've just done.

Post reply on HN