Re: flow or stock?

["Christian Gregory" <christian11@xxxxxxxxxxxxxx>]

Paul Davidson wrote:

>But the concept of "information" means what?  Information about the  future
realized values will be !!  But if the stream of returns on real capital
stetches into the nonergodic future, then it is logically inconsistent to
say that "information" about these future quasi-rents (earnings?) exist
today.

>When people use price/earnings ratios they are using past  statistical data
and assuming that the future will reflect the statistical shadow of the
past-- i.e., that the future earnings path is ergodic. It is not talking
past each other Cliff, ir is about being logically consistent.  When you
suggest that the efficient market hypothesis has some shred of real world
relevance, you are saying that the future earnings of real capital goods
represented by titles to the enterprise is ergodically determined. There is
no getting away from this --even if a Nobel Prize winer says so!

I'm not clear in this discussion what you mean by speculation. Are you
saying that holding something for speculative purposes means that the
calculation of future income streams never occurs to one, as the holder? Why
wouldn't you treat the EMH-driven interpretations of stock values as part of
the conventions by which things are valued, with the understanding that such
conventions can and will change according to new information? Why, in other
words, is the EMH not part of the rules of the beauty contest? What other
rules of interpretation do you think we should use for evaluating
securities? (Or do you think that they shouldn't exist?)

I'm also a little curious about the degree to which non-ergodicity applies.
If there is _nothing_ that can be ergodically determined, then even
Keynesian policy prescriptions would be ruled out, since they imply (as does
any theory) applicability across space and time. In other words, I don't see
why insisting on this high-threshold of ergodicity doesn't in fact lead you
to suggest that since nothing can be known about the future, nothing can be
done.

Christian