Julio Huato wrote:
Michael Perelman wrote:
But, we never really know what
the fundamentals are, other than
they are not too euphoric or not
too pessimistic.
We never know the true probability distribution of *any* interesting
variable in the social sciences. That includes the ever shifting
"fundamental" price of assets.
What meaning can "the true probability distribution" have here?
Probability distribution (objective) can apply to the outcome of a
series of "random" events like throws of dice or spins of a roulette
wheel, or to (subjective) *an* estimate of the "likelihood" of
various (mutually incompatible) future possibilities. But (first
case) "variables" in the social
sciences are essentially unique (100% probable), like the present
value of an asset as determined ex post. And (second case) nobody
ever even
tries to estimate a true probability distribution comprising all possible
values of such a "variable." So how can the people who make up the
"markets" get it all wrong? The reason is that "all" is very long term, and
their only interest is very short term because that is where the loot is.
And in *every* short term they (collectively) make out like the
bandits they are. The huge costs are borne by other people, including
classsical shareholders, not only workers and their pension funds.
Shane Mage
"When we read on a printed page the doctrine of Pythagoras that all
things are made of numbers, it seems mystical, mystifying, even
downright silly.
When we read on a computer screen the doctrine of Pythagoras that all
things are made of numbers, it seems self-evidently true." (N.
Weiner)
