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Mike | Abundance 🌟
@abundance
whenever I hear people say that "markets are efficient" I want to ask them how efficient is it for the economy when potential Einsteins and Feynmans work as Uber drivers instead of spending that time moving humanity (& the economy) forward? The truth is that markets are only efficient when the product people make capture value (people make money in exchange for creating value for others). But most of the things that would have the greatest impact on people's lives cannot capture value within the economic structures we have today. So Einsteins and Feynmans work as Uber drivers, waiters, or hedge fund managers. And instead of making our lives 10X better they're stuck in a system that increasingly centralizes power and control within the hands of those who play the extraction game better. This doesn't mean that the situation is hopeless by any means. It just means that we need to stop being complacent about so called "economic efficiency" and start building better systems
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Trigs
@trigs
Markets are efficient at moving capital. That's it. That's all they do. Everything else is on the social layer to design systems that promote things we want to be promoted.
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Mike | Abundance 🌟
@abundance
But in what sense are they "efficient" then? Economics 101 says purpose should be efficient use of resources (both labor & material). Capital should be an accessory to that, no?
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Trigs
@trigs
Efficient use of resources for what tho? That's my point. The current social/regulatory environment encourages markets to activate resources to utilize the available materials and labor to move more capital upwards to those at the top that are positioned to capture the value creation. Markets are seemingly efficient at doing this. They could be perfectly efficient at moving capital more laterally, but that's not how the social layer has structured them to work. I dunno, maybe I'm looking at the term efficiency wrong. I guess what I'm getting at is that "efficiency" is unbiased. A system can efficiently do things that are not in our collective best interests. Just being efficient doesn't mean virtuous or even valuable. Perhaps you're making a different point that is getting muddied by the context of my point! 😆
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Mike | Abundance 🌟
@abundance
Econ 101 says we have unlimited "wants" but limited resources. And so efficient (or Pareto efficient) use of resources, means maximizing those wants within the given resources. Markets - given certain conditions like perfect competition, perfect info, no externalities and rational actors - are supposed to result in this efficiency. My argument is that, even given our "imperfect" markets (and without falling into tautological reasoning), are nowhere near as efficient as the theory suggests. Markets underutilize "labor" because the most efficient use of such labor ("Einsteins & Feynmans" in my example) - ie what would produce a much greater maximization of "wants" given same labor - doesn't result in value capture in the market. It's not that capitalist capture this value instead. No one does.
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