RE: Some Econ Pessimism?

Robin Hanson (
Tue, 18 Feb 1997 16:26:27 -0800 (PST)

>>Note the implication though: Most capitalists have never appreciated
>>the value of free markets, or they would have invested here instead of
>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.

Yes, both U.S. and foreign investors should have preferred to invest
here, had they expected free markets to help U.S. investments so.

>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 don't think desires to diversification can explain this difference
in returns, absent any increased riskiness of U.S. investments.
Standard finance theories just don't support this.

Robin D. Hanson