Efficient Markets Hypothesis

There have been a couple of blog posts about the Efficient Markets Hypothesis in the past week:

How To Dis EMH By Robin Hanson January 9, 2010 11:15 am on Overcoming Bias

Then The Efficient Markets Hypothesis by Steve Sailer, Friday, January 15, 2010 on his blog.

According to the Efficient Markets Hypothesis markets reflect ALL relevant information, not just public, since any purchase or sale in a market, even that based entirely on private information is reflected in the price. And if someone has private information but does not act on it, by buying or selling, then it is not relevant as it does not affect the market price.

Two, collapses and delayed effects are PART of the EMH. No one who wasn't out of touch with reality has ever claimed that markets instantly reflect all possible information. I am sure someone, probably an academic somewhere, has made that claim.

Three, the biggest claim is obviously true, that there is NOTHING that produces more accurate prices and hence more efficient exchanges than the market. It's not some magic wand, just there is no humanly better alternative.

Markets are in a way a set of "distributed algorithms" for establishing and managing exchanges. But instead of being established across computers which are much to slow and weak, they work across human minds. Each mind only deals with a small fraction of the available information and outputs its decisions in the form of buy or don't buy or sell decisions; that is a decision as to whether the "market price" is lower, close to, or higher than their evaluation of value.

When we have "minds" more powerful than our own, markets may become obsolete, like in the "Economics 2.0" of Charles Stross's novel Accelerando (Singularity).

But until then there is no viable alternative for humans either to markets or to crippled command-type economies. The so-called "mixed economies" are not stable; special interests, especially the interests of government bureaucrats and politicians in increasing their power, inevitably leads to growth of the command side of the economy at the expense of the market.

Substantially edited to correct poor wording, 1:15 PM.

Foresight versus Negativity and Pessimism

When I worked remodeling and landscaping I used to try to visualize what could go wrong and head potential problems off while we were still planning the work. I finally got tired of the man I was working for calling me a pessimist and complaining about my negativity and quit saying anything.

Stay well away from anyone who uses the word "negativity". Every time I have heard it used it was an attack on someone attempting to show some foresight.

Are Best Practices the New Mediocrity

Good point - if everyone is doing something it's mediocre, even if it's called "best practices". Probably, the use of "best practices" should be replaced with "standard practices", which is an almost as common synonym, and is more accurate.

The Road to Mediocrity is Paved with Best Practices

Effectiveness

Working More Effectively
Stop worrying, straining, trying, and just do it and you will probably do it better. Relax and you can be faster, more powerful, and more accurate.

Worrying about anything will interfere with doing it. To do something well, focus on what you are doing, set your emotions aside. Emotions are necessary to doing - as motivation to do anything in the first place and as further motivation to do it well. But emotion while you are working is a distraction and will interfere with doing first class work.

You need to prepare and learn in advance to do something well, all worrying when you are trying to do it does is interfere with your actions. No matter how poorly you may have prepared, when it comes time to act, then act without worrying, because worrying will only reduce your effectiveness even further.

Efficiency amounts to being effective using as few resources as possible.

Effective Ends
Effectiveness is most often used in relation to activities and processes and to how well they lead to achieving your goals. But it can also be used about the goals themselves. A more effective goal is one that contributes more to your highest Values; less effective, or even ineffective, goals only satisfy themselves and momentary interests or pleasures.

You should consider the effectiveness of your goals before investing too much time and resources in them.

Physical Effectiveness (capacity & capabilities) is more or less obvious, but I may do a post on this later.