Economics and information

19 Aug, 2020 at 08:32 | Posted in Economics | 3 Comments

balloonA balloonist, lost, sees someone walking down a country lane. The balloonist lowers the balloon and shouts down to the the walker:

“Where am I?”

“About 20 feet above the ground,” comes the reply.

After a moment’s pondering, the balloonist says:

“You must be an economist.”

“How did you know?”

“Your information is perfectly correct and totally useless.”

Grossman-Stiglitz-paradoxen visar att om marknaden vore effektiv – om priser fullt ut reflekterar tillgänglig information – skulle ingen aktör ha incitament att skaffa den information som priserna förutsätts bygga på. Om å andra sidan ingen aktör är informerad skulle det löna sig för en aktör att införskaffa information. Följaktligen kan marknadspriserna inte inkorporera all relevant information om de nyttigheter som byts på marknaden. Självklart är detta för (i regel marknadsapologetiska) mainstreamekonomer synnerligen störande. Därav ‘tystnaden’ kring artikeln och dess paradox!

Grossman & Stiglitz – precis som senare Frydman & Goldberg gör i Imperfect Knowledge Economics (Princeton University Press 2007) – utgår från och förhåller sig till Lucas et consortes. Deras värdering av det informationsparadigm som rationella förväntningar bygger på sammanfaller också så vitt jag kan bedöma helt med min egen. Det är ur relevans- och realismsynpunkt nonsens på styltor. Grossman-Stiglitz-paradoxen är kraftfull som ett yxhugg mot den neoklassiska roten. Det är därför den så gärna ”glöms” bort av neoklassiska ekonomer.

Kruxet med ”effektiva marknader” är – som Grossman & Stiglitz på ett lysande sätt visar – att de strikt teoretiskt bara kan föreligga när information är kostnadsfri. När information inte är gratis kan priset inte perfekt återspegla mängden tillgänglig information (nota bene – detta gäller vare sig asymmetrier föreligger eller ej).

Den i mitt tycke intressantaste funderingen utifrån Grossman & Stiglitz blir vad vi har för glädje av teorier som bygger på ”brusfria” marknader, när de inte bara är hopplöst orealistiska utan också visar sig vara teoretiskt inkonsistenta.

Trams är trams om än i vackra dosor.

3 Comments

  1. I like the ballooning example. But what is paradoxical about Grossman-Stiglitz? Doesn’t it just confirm Keynes’ view? (Sorry if you covered this in the bit I cant read.)

    Comment by Dave Marsay— 19 Aug, 2020 #

    • [A machine translation]
      .
      The Grossman-Stiglitz paradox shows that if the market were efficient – if prices fully reflect available information – no operator would have the incentive to obtain the information on which prices are supposed to be based. On the other hand, if no operator is informed, it would be worthwhile for an operator to obtain information. Consequently, market prices cannot incorporate all relevant information on the goods exchanged on the market. Of course, this is particularly disturbing to (generally market apologistic) mainstream economists. Hence the ‘silence’ surrounding the article and its paradox!
      .
      Grossman & Stiglitz – just as later Frydman & Goldberg does in Imperfect Economics Economics (Princeton University Press 2007) – starts from and relates to Lucas et consortes. Their assessment of the information paradigm on which rational expectations are based also coincides as far as I can judge entirely with my own. From a point of view of relevance and realism, it is nonsense on stilts. The Grossman-Stiglitz paradox is powerful as an axe to the neoclassical root. That’s why it’s so readily “forgotten” by neoclassical economists.
      .
      The crux of “efficient markets” is – as Grossman & Stiglitz brilliantly shows – that they can strictly theoretically only exist when information is free of charge. When information is not free, the price cannot perfectly reflect the amount of information available (nota bene – this applies whether asymmetries exist or not).
      .
      The most interesting, in my opinion, from Grossman & Stiglitz will be what we have for the joy of theories based on “noise-free” markets, when they are not only hopelessly unrealistic but also turn out to be theoretically inconsistent.
      .
      Nonsense is nonsense albeit in beautiful cans. [A machine translation]

      Comment by Bruce Wilder— 19 Aug, 2020 #

      • Thanks. My reading of Keynes’ ‘Treatise on Probability’ is that it reveals the nonsense of economists who seek to ape mathematical physics without being at all concerned about its appropriateness. Unfortunately (1) people don’t seem to get it (despite Lars’ best efforts) and (2) the dismal effect of this lack of understanding seems to me to go far beyond economics.

        To take your last line, my own view is that ‘canned’ mathematical physics can be made sense of ‘as is’ by appreciating the significance of its canning, and improved by uncanning it. Some day, I hope to understand why people so often put perfectly reasonable mathematics in such nonsense boxes. Then maybe we could move on (Other solutions may be available.)

        Comment by Dave Marsay— 19 Aug, 2020 #


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