RE: Efficient Markets Theory and Paul Davidson's post

[Claude GNOS <gnosc@xxxxxxxxxxxxxx>]

At 11:18 15/01/99 -0500, you wrote:
>I tend to agree with you that I have serious doubts about the securities
>market's ability to allocate capital efficiently.  Doug Henwood, in _Wall
>Street_ pointed out that the stock market actually provides a tiny amount of
>actual capital to businesses.  Most business investment is funded through
>internal cash flow first, then bond issues or bank loans and only a tiny
>amount through IPO's or new stock issues.
>
>My question about the efficient markets theory is only that the theory says
>(if I'm reading/remembering correctly) that the market will price new
>information too quickly to use it to trade from.  So if I see that a drought
>has caused the price of apples to double and I know that Motts happens to
>have a large inventory of apples, I may call my broker and try to buy some
>shares in the hopes that this new information will cause Motts to go up.
>The efficient markets theory only says that chances are Motts will already
>have gone up by the time I get through to my broker.  This doesn't mean that
>the market will have 'correctly' priced Motts.
>
>
>> -----Original Message-----
>> Sent:	Thursday, January 03, 1980 9:33 PM
>> To:	POST-KEYNESIAN THOUGHT
>> Subject:	RE: Efficient Markets Theory and Paul Davidson's post
>>
>> some comments:
>>
>> I think there exist some things that can be regulated by the market,
>> as the size of a skirt, the new fashion, or the quantity of hamburguers
>> to sell at the school. Nevertheless, Socioeconomic problems
>> as the level of education, the distribution of income, the generation
>> of employment, or somethings like these, can't be regulated
>> by the market. Then, it is needed an strong government, with access
>> to the necessary resources in order to finance its activities.
>> And what better than finance the economy with internal resources
>> I mean, internal saving. Of course I am making reference to
>> the participation of the government in questions as the health, education,
>> infraestructure, and not to the intervention as a shareholder in
>> enterprises. Which would be the macro and micro economic policies
>> that a postkeynesian suggest should be carried out?
>>
>> Lissette Moreno.
>> Faculty of Economics
>> National Autonomous University of Mexico.
>> movi273@xxxxxxxxxxxxxxxxx
>>
>>
>> ----------
>> > De: Brian Considine <bconsidi@xxxxxxxxxxx>
>> > A: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>> > Asunto: Efficient Markets Theory and Paul Davidson's post
>> > Fecha: viernes 15 de enero de 1999 8:56
>> >
>> >
>> > Paul Davidson
>> > >The efficient market theory is the backbone of today's
>> > >conventional economic wisdom. Its mantra is "the market knows
>> > >best; markets are efficient and governments are inefficient".
>> > >This view is epitomized in US Deputy Treasury Summers's
>> > >statement: "the ultimate social functions [of financial markets
>> > >are] spreading risks, guiding the investment of scarce
>> > >capital, and processing and disseminating the information
>> > >possessed by diverse traders...prices will always reflect
>> > >fundamental values ....  The logic of efficient markets is
>> > >compelling".
>> >
>> > Question:  Isn't the actual efficient market theory only a statement
>> about
>> > how quickly the market adjusts to information?  In other words, you
>> can't
>> > use information to beat the market on a regular basis because the market
>> > will almost always alter its prices before you can get your trade
>> through.
>> >
>> > To me this doesn't seem to be anti-Keynesian.  After all, no amount of
>> > information from 'Slot Machine News' is likely to help you at the Casino
>> ;).
>> > The efficient markets theory isn't saying that the market will price
>> > information correctly, only quickly.
>> >
>> > Brian e. Considine
>
>
Claude GNOS