Re: ECON: Market efficiency: good or bad?
Tue, 6 Jul 1999 08:27:50 -0700 (PDT) wrote:
>So I take it you guys believe that a stock is worth something different to
>what the next guy will pay for it?

I can't speak for anyone else, but the problem I have with this kind of intervention in the stock market is that it encourages all kinds of bizarre and inefficient investments.

>Yes, stocks overshoot and create bubbles and panics. We know that just by
>looking around us. But the only alternative has decidedly un-extropian
>implications. The alternative requires us to assume that the true value of
>a stock (or any asset, for that matter) can be something different to what
>the next buyer says it is.

No, the alternative is to get the government out of the market and let people make up their own minds as to value.

>Well, insider trading laws don't in fact slow the process of disseminating >information; their purpose is to prevent people who know more from acting
>on it before the information is "adequately" disseminated.

And why should "adequate" dissemination be important? Why should people who are trying to work out whether to invest in a particular company be prevented from discussing the true nature of the company until information is "adequately" disseminated? If someone was thinking of investing in a company that another person worked for, and if that company was going down but the company hadn't yet admitted this fact, why should the employee not be able to warn the potential investor? Why should the investor lose all their money just because the government wanted to be sure the information about the company's impending collapse was "adequately" disseminated before employees were able to talk about it? Why shouldn't active, involved investors be able to get accurate information about the companies they invest in? Preventing this flow of information merely turns the market into a lottery.

>Any top-down set of controls ultimately fails.

Uh, so why are you supporting insider trading laws?