The thing about economics is that you can keep studying and studying and get none the wiser. All the low hanging fruit are still there to pick but nobody is interested in that research because it is the equivalent of going from geocentrism to heliocentrism.
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. Yes, the proverbial corn economy works if all you care about is corn.
From my perspective neoclassical economics is just a disguised form of centrally planned communism so that capitalists can claim the supposed benefits of communism for themselves, while they do something different behind the scenes. Communism should be rejected because it is not possible to implement it and so should neoclassical economics. This leaves us with a lot of research opportunities that nobody is willing to take.
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.
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 that is what you are going for here.
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.
But then, these navel-gazing critiques of capitalism only work in a vacuum. Why do these men in suits assemble in these temples of finance to perform these arcane rituals, to utter these numerical incantations? It's weird, right? They must be searching for god, or maybe they never got enough love growing up. Couldn't have anything to do with actual human experience telling us that the market is the most resilient and efficient (if not always the most fair) way of deciding, as a society, how to employ our scarce resources in a useful way. The people who buy and sell abstract claims on collective human endeavours must do so out of some deep-rooted spiritual malaise and it can't be related in any way to their own very mundane desire to put food on the table and maybe even spend a couple of weeks a year in a tropical location with people they love.
No, we should probably get rid of all this weird ideological baggage. (What do we replace it with? Oh, that's not my department...)
Diamonds are worth a fraction of what Debeers wants for them, but people still pay it because those are the only prices they've ever seen. On the other hand, printers are worth far more than they sell for, yet nobody would consider paying the actual price for them.
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
Like the discount rate itself, this seems am arbitrary rhetorical choice.
I agree, at a very high level of abstraction, insofar as both a community of faith and finance are about rendering the future "somewhat predictable", though, in that sense, the future resembles the weather.
you can get away just fine writing in all lowercase characters, as i've just done.
That is exactly the way things worked in feudal Europe. Nobles were interested in acquiring, for example, rights to a demesne lands not because they were interested in how much food they could produce or whatever, but because it was an income stream. At first, that meant in-kind income. Towards the later Middle Ages, it was monetized into cash income.
I don’t have a larger point, except to say that the person is so focused on their critique of capitalism that their explanation of what is essential to capitalism is wrong.
But these numbers aren't chosen by economists or any other individual. If prices aren't arbitrary then neither are discount rates.
Is it right that this long essay is saying (roughly) that share prices are not really related to future earning expectations, but to future share price expectations? Well, blow me down with a feather. I'd never have guessed that stock markets were mainly about speculation.
https://books.google.de/books/about/Volkswirtschaftliche_Sal...
