And Robin Hanson replied:
<That's the positive interpretation. Let's hope its true. Note the
implication though: Most capitalists have never appreciated the value
of free markets, or they would have invested here instead of
elsewhere.>
Then I questioned: Hmmm, why should they distinguish here from there?
Must adventurers always be judged as pirates just because they see
easier pickings over the uncharted horizon?
And, on Tuesday, February 18, 1997 12:43 PM, you wrote:
<You've lost me here. Investors should move to where the expect
higher returns, just as people should move to where wages are highest.
I don't see a relation between this and piracy.>
Sorry for going poetic and rambling romantically about pirates and
such - I really wanted to refer to pioneers rather than bucaneers.
Your response clarifies that you meant (I think) that investors should
have been investing here in the U.S., rather than overseas, because
that's where they could get the highest returns.
It seems to me, though, that investors like to diversify. Even if
they know (and it's doubtful that they had the kind of quantified
knowledge of comparative investment returns in major world markets
that the study you cited provided) where to get the best return, they
might not want to put all their eggs in one basket. I would think
this overseas "adventurism", despite more assured investments at home,
implies that investors aren't always completely rational, that they
are willing to take risks and be pioneers in new markets.
I was organizing some of my note files over the weekend and found this
item that might have some relevance here:
<06/06/96. RATIONAL BEHAVIOR. Roger Lowenstein's WSJ "Intrinsic Value"
column describes the work of the late Israeli psychologist Amos
Tversky at challenging the economics assumption of rational behavior.
Tversky showed that people exhibit 'loss aversion', the desire to find
patterns in random events and comparative evaluations that do not
usually produce rational behavior.>
I don't know if Tversky or others have also shown that people act
irrationally when they are willing to take risks in new areas.
Mark Crosby