rhanson@gmu.edu (Robin Hanson) writes:
>Stock markets implicitly forecast out to infinity. That is, they estimate
>a weighted average of future profits, weighted by risk-rated interest rates.
On most of the questions that investors consider important, few people
attempt to forecast more than 5 years ahead, and once an investor sees
slightly further ahead than most, there is little incentive to see further.
So the market basically gives up on forecasting answers to those questions
out to infinity.
But this is largely because markets focus attention on questions which are
hard but not impossible to answer, such as comparing the competence of
groups of people who have been selected for high competence.
The are many questions on which markets provide clear and relatively reliable
longer term forecasts, such as whether Cisco's revenues will grow faster than
U.S. Steel's revenues between 2005 and 2010. Democratic processes prefer to
obfuscate answers to many of these questions.
>But I think this is as it should be. The benefits of citizens being
>ridiculously rich just a year sooner are so enormous that it should
>get a very large weight. Of course it wouldn't be worth, say, losing
>half the population to a sudden death, but my proposed measure gets
>that right too I think.
I wish I could share your confidence that your measure properly weights
the consequences of disaster. I suspect it will take a lot of trial and
error before any measure deserves confidence.
-- ------------------------------------------------------------------------------ Peter McCluskey | Fed up with democracy's problems? Examine Futarchy: http://www.rahul.net/pcm | http://hanson.gmu.edu/futarchy.pdf or .ps
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