My friend Marty sent me this along with the note “I’m sure a thousand people sent you this today, but I figured I would pass it along nonetheless.” From Saturday Morning Breakfast Cereal:
Hmph. It’s funny because it’s true…no wait, it’s funny because I dare you to find me something that would legitimately qualify as an “economics show.” (And no, Jim Cramer does not count in this category.)
Actually, Marty’s note was more interesting to me than the comic itself. It reminded me of the joke about the economist and the efficient markets hypothesis:
A financial economist and passionate defender of the efficient markets hypothesis walks down the street with a friend.
The friend stops and says, “Look, there is a $20 bill on the ground!”
The economist turns and coolly replies, “Can’t be. If there was a $20 bill on the ground, somebody would have already picked it up.”
The efficient markets hypothesis posits that it’s impossible to consistently beat the market without inside information, since all available information is already baked into market prices. Now, the context of this clearly relates to financial markets, but Marty’s statement shows the logical gap in the hypothesis’ reasoning, at least when it’s taken to an extreme. If everyone assumed that markets were instantaneously efficient, no one would look to take advantage of profit opportunities…but if people didn’t compete away these profit opportunities, markets wouldn’t actually be efficient and there would instead be a huge coordination failure. In the case of my comic, if everyone assumed that a thousand people already sent me the comic, then no one would actually send me the comic, and I would be sad and without material. See how that works?
Here is another coordination failure comic, if you haven’t gotten enough for now already.