Eugene Coyle wrote: > To me what finance theory does is reject static micro. You mention > NPV. There's nowhere for that in neo-classical econ. There is no > place for businesses having plans, either -- they just look each > morning at the price in the market and produce that day's quantity. > So although some of modern finance was developed by economists, I > would say it is unrelated to economics. It is a dynamic analysis, > there is a future.
alas, there is a role for net present value and business plans in static neoclassical econ. Assume we have so-called "rational expectations" (perfect foresight with some random error thrown in). Then the future is really nothing but a projection of the present. Differences in time period are equivalent to distances in space. Voila! dynamics have been reduced to statics. and in finance, the hard-core versions of the "efficient markets hypothesis" are based on rational expectations. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
