How Our Taxi Article Happened to Undercut the Efficient Market Hypothesis

An article about the falling prices of taxi medallions helped cause a drop in a company’s stock price. That’s not supposed to happen.

Comments: 62

  1. Uber doesn't pay even half in municipal fees and dues of what our local small taxicab businesses are paying.

    It's concerning that this one multi-billion dollar mega-corporation is allowed to decimate thousands of small businesses that have done nothing wrong and in fact contribute far more to local economies than Uber ever did or will.

    With the exit of Hailo, Uber has become a de-facto monopoly.
    NY AG should concern himself with anti-trust concerns when it comes to Uber. I would. We can throw all kind of fancy facts and colors, and G-d knows,
    Uber loves endless gimmicks, but the basic fact remains - this "competition"
    is unfair at best, and is likely unlawful. Rules should have been maintained
    on the same equal level for both thousands of small taxicabs businesses
    and multi-billion dollar tax-evading Uber.

  2. Uber discovered something. Hailing a taxi is not a good experience. For people like me (brown, male) in NYC it's really a terrible, humiliating experience. I've more than once had to have white friends get cabs for me to get back to whatever hotel I happen to be staying at.

    Flat rate regulated pricing causes scarcity during periods of high demand (rain). Uber made a business out of solving that problem. They are not perfect, certainly, but they are solving a problem that exists. Consumers, the customers, find the service from Uber to be better. I feel the pain of owners of small taxi companies (my grandfather had a small taxi company in NJ) that have played the game by the rules - but the game itself is changing. Think about it - many times, Uber costs more than a cab, yet people are willing to pay for it. Keep in mind that the Uber drivers are independent contractors - arguably owners of the smallest businesses on Earth - 1 employee.

  3. What ensures that Uber owner-operators don't charge higher prices on the basis of skin color?

  4. one employee supported by big corporation that soon will be sued in India because one of its Uber Drivers raped one of its customers. Uber does not run background checks and refuses to accept responsiblity for its drivers, re insuring them for damages. Uber Driver are not required to have insurance, background checks, or car inspections. Further there are dozens of cases of Uber "contractors" that seriously injured people in crashes in San Francisco and several other cases are pending around the country. So those who sow the wind will reap the whirlwind. That's why Uber will not pick up where its contractors do not want to go, pick up at inconvenient times, and those that do charge a sliding scale based on whim and greed, not regulatory processes. Enjoy your app fad

  5. Cue the bleats and keening of the pre-extinction dinosaurs... Uber doesn't do this... Uber doesn't do that... what was that flash in the sky?

  6. SteveRR, laws cannot be made selective, and should not bend just because uber has billions to spend. Do you realize that there are thousands of small local transportation businesses operating in that same market? And that they are not, unlike uber, manipulating reality or making laughable claims like "we are not in a transportation business"?

    Citibank has an app, yet you don't see Citibank exclude itself from banking regulations and applicable laws.

    It's time to realize that consolidation of all power at the hands of one
    monopolistic bullying multi-billion dollars tax-evading entity (read:uber) will not benefit anyone, not in the short run, nor in the long.

  7. May benefit the drivers, doesn't benefit the public, which is why Uber will eventually win.

  8. Thank you, Josh. Ethics are a commodity of rarest quality. And I, and thousands of other taxicabs drivers, appreciate yours. God bless.

  9. The answer is that the market is NOT efficient in many areas. It works for two gas stations that face each other on Main Street USA. It doesn't work when you throw in inelasticity, information asymmetry, timing differences, etc. -- all the things you were told to "assume away" in Econ 101. This is why the market needs to be regulated -- heavily in some areas -- because a nod or a wink or a phone call can have major effects. There's a famous example of the president of American Airlines urging now-defunct Braniff to raise its fares:http://www.texasmonthly.com/content/bob-crandall-flies-handle/page/0/4 This kind of stuff happens enough times in enough places to make the Econ 101 market more the exception than the rule.

  10. Not to mention extraordinary popular delusions and the madness of crowds. In fact, one of the case studies in Charles Mackey's famous book was the South Sea Bubble.

    Markets do eventually sort themselves out, but the key word is "eventually." I don't expect millisecond-to-millisecond efficiency, and I don't think any mature investor - in anything - should either.

  11. The efficient market hypothesis is bunk. The article scared the market, plain and simple.

  12. Mr. Barro and Readers: The three reasons proffered for this seeming imperfection in the Efficient Market Hypothesis are all cogent. Since the stock is not widely owned, this lack of ownwership makes it more susceptible to volatile price movements than other stocks with larger ownership bases and, more intense media and analytical coverage. In simple cost/benefit terms, with this narrower ownership base, research regarding smaller stocks is not as thorough nor diverse as that for larger stocks, because of a lower ROI on this research. The NY Times Magazine weekly economic article (11/30/2014), discussing landlords renting out their unoccupied flats on more profitable, shorter term leases nicely complements today's discussion. Citing Dr. Piketty's recent work, this Magazine article states that capital is currently outpacing labor in its share of GDP growth capture, to help explain the wider use of these briefer leases, in a more "sharing economy." Via individual cab medallions or Uber adaptations cited in today's analysis, a person could provide both their own capital and labor. For given levels of service output, all factors of production would be under the vehicle owner's control. That is: for each level of output, which is determined by combinations of labor and capital; and termed an isoquant: [Output = f(Labor, Physical Capital)], the isoquant would be owner determined; and, also IT's general role in developing this "sharing economy" clearer. [{JJL} 12/03/2014 Wed 12:25 p]

  13. and economists want to be the same as "scientists."

  14. If you assume that people independently trade based on the true market value of a stock, then this indeed makes little sense. But if you instead assume that people trade on what they think others will do, then things like an article in a prominent newspaper (even if containing only public information) may well be a rational basis for selling or buying. Who knew putting humans in the equation could lead to herd behavior?

  15. I have been investing in individual stocks for over 20 years. I can tell your from experience that the stock market is dumber than a box of rocks. It will cheerfully ignore the obvious for a long time; then some analyst will mention the obvious in his report, and the stock will drop 30% in a day.

    This is how skilled investors, who are able to think for themselves, can make money. Draw your own conclusions, and act before the crowd does.

  16. so you saying markets are not "efficient" at pricing goods?

  17. It's rather obvious that they are not. Markets are about consensus forming. Getting a whole bunch of people to agree on things is never particularly efficient. That's one of the ways to make money on the market.

  18. The efficient market hypothesis is an ideal that works in a perfect situation including obeying all of the rules.
    You give yourself too much credit, to little surprise. The computer algorithm traders with their first access to information and trading cause a lot of sudden spikes and drops in individual stock prices and most likely figured in this one.
    One can play along in this high stakes betting parlor by placing very high or low standing orders on items of interest and riding along when the computer boys hit.

  19. How's this different from an analyst's cutting of the stock rating? All information is already out there. Yet, an influential analyst's interpretation and subsequent cutting of the rating can push down the stock price. The interpretation of information is also an information, and the the market's reaction to it, even if it is just a perception, is the proof that EMH is working rather than not working.

    The real proof against EMH is if you can take advantage of such "inefficiency". There probably were some individuals who benefitted from Medallion's price drop. It's harder to tell if they were just at the right place at the right time to benefit from the NYT article's changing the perception or they can sniff out the inefficiency consistently.

  20. What actually went into effect was the " chicken little" theory.

  21. The earth is flat! The moon is cheese! Phlogiston powers combustion! And, of course, the markets are efficient!

    Now I must go have my blood let to insure my humors remain in balance ... and to avoid digressing into additional dogmatic topics, like religion or politics.

  22. 1) There's theory and there's practice. In practice, many more people apparently took this issue seriously when it appeared in the NYTimes. 2) Another interpretation is simply this: certain media outlets have an out-sized influence on opinion.

  23. The efficient market hypothesis? Do people still take that seriously?

    It's 2014, people.

  24. I do. Just not over a holiday weekend. Thanks for asking!

  25. The EMH is incorrect. It is too simple to account for complicated real world situations. It should be taken for what it is, a useful framework, rather than "a law". Indeed, much of economics is in this situation, economists are not yet anywhere close to being able to propound natural laws the way physical scientists can more comfortably do, in some cases. Many of the brilliant economists (In Chicago :-) who come up with these "laws" tend to want to give themselves too much credit though. Good for the author to stick it to The Man.

    Take another recent example, which interesting enough the author referred to obliquely in the article: the crude oil market.

    On Thanksgiving, OPEC was to meet to decide its output policy over the next 6 months. The overwhelming consensus, backed by telegraphed statements from the most powerful OPEC members was that they would not cut production, in an attempt to force others to do so, rather than accommodating new players, by continually reducing their own output. Many analysts then concluded that a "no cut" decision would lead to little movement in the Oil price, and "OPEC is now toothless" etc.

    Well, OPEC did decide not to cut, and the next day Oil prices tanked, backed up by a few more days of frenzy. This is Oil we are talking about here, perhaps the most liquidly traded commodity on earth. A lot of information was available before the meeting that they would not cut. When they did not cut, hell broke loose. Some efficiency.

  26. There was a probability distribution on what OPEC would do, with much of the distribution on the no cut side. But once that actual decision not to cut was realized, there was a new distribution and the market reacted to the new distribution. Before the opec decision was made there was some probability that there would be a cut - after there was none.

  27. "economists are not yet anywhere close to being able to propound natural laws the way physical scientists can more comfortably do," economic 'laws' are fundamentally different in kind from natural laws. a law of physics is NEVER violated. if it was, that law would be incorrect and would be replaced.

  28. Mr. Naive - the laws of physics are violated all the time - hence the attempt to unify them

    The physics to put a ship on the moon is different and incommensurate with the physics to collide two particles

  29. Medallion Financial is a lender. Its stock price depends on the number of loans it makes, the interest rate it charges and loan defaults. An article about taxi medallion price declines in the NY Times reaches a much wider audience than the other information sources. It has the potential to scare away potential buyers and lower the sales volume of medallions and the number of new loans Medallion Financial makes. The outlook for Medallion Financial's future profit is lower after the publication in the NY Times than before. Investors lowered their profit outlook for the company because they now expect fewer medallion sales and fewer medallion financial loans due to the NY Times article.

  30. Both extreme propositions are wrong: financial markets are not hopelessly inefficient, nor are they fully efficient. But they are close to efficient: very smart people, who spend their entire careers trying to beat the market, generally do not beat the market. That is why index funds are such good investments. Of the two incorrect propositions above, the belief that markets are badly inefficient is the more damaging because it induces people to waste lots of time and money in the belief that a smart investor who trades at the right times can outwit the market. This delusion generates handsome incomes for professional money managers, who earn from every transaction, but generally no premium for their clients. Research has shown that over confidence and the resulting over-trading is a guy thing much more than something women delude themselves with. You think you can beat the market? Uh huh. Chances are that financial markets are too efficient for you to do that. Insider trading is always a winning strategy, though. Just don't bet on public information.

  31. People who trade taxi medallions are presumably not Wall Streeters. It is likely that the stock move was in response to rational expectations that the news would influence those who trade medallions. The stock price move was a second level effect. The price of the stock has fallen nearly 40% in the past year whereas the official price of a medallion had been flat until recently. If you compare the price of the stock with the volume of searches as measured by Google Trends for “Uber” it is a mirror image. The price of the stock started to tank at the inflection point of “uber” searches in November of last year. The lesson to be drawn from this is not the market is inefficient but that government bureaucrats are blind to market signals and can be clueless about what’s going on right under their noses.

    http://www.google.com/trends/explore#q=uber&cmpt=q

  32. Right on!

  33. The author assumes that the drop in Medallion Financial's stock price reveals a market inefficiency, then casts around for explanations for that inefficiency. I propose that the drop in stock price demonstrates market efficiency.

    The author asserts that almost all of the facts in the article were already public knowledge. But the fact that the article would be published was not public knowledge - until it was published. The market efficiently priced the publication of the article into the Medallion Financial stock price - dropping seven percent in the opening minutes of the next trading day.

    The market reasonably anticipated that the New York Times drawing attention to even publicly available facts would give those facts added impact - maybe not panic selling, exactly, but let's say "concerned" selling.

    politicsbyeccehomo.wordpress.com

  34. Barro is not saying that the market did not respond efficiently to his article but that EMH would state that the public info was available to all and therefore would already be priced into the market.

  35. Aren't there several different types of traders out there? Retail, institutional, high frequency, and computer algorithms that can be triggered to buy and sell on all types of information. I believe I read something about a computer program that makes buy/sell decisions based on headlines. If this is so then doesn't this reflect that the market is no longer about what is a good investment but about speculation? Speculation is far different than investing isn't it? How about the Federal Reserve's interventions since 2008? How can an efficient market hypothesis even be considered when the market needed help to maintain. I think your readers who trade on their own should be careful- there is a lot of borrowed money in the market right now. This happened prior to the Great Depression. Everyone encouraged by well respected economists like Irving Fischer climbed on the bandwagon and then the rug was pulled out. Economists have been wrong before and they will be wrong again. Theories based on investment do not hold true when speculation is rampant. Will it happen today, tomorrow- who knows but you are up against sophisticated hardware that will get out before you can formulate a plan.

  36. Point is that EMH doesn't "believe" that long term speculation (or maybe even short term) exists. A whole bunch of other economists, however, do believe that these things exist and doesn't think they are necessarily good.

  37. Over 50 years ago, when I was 16 I met the parents of a school friend. His father owned a seat on the NY Stock Exchange. In subsequent visits I learned about the stock market, the various terms and most of all the difference between investing and speculation. I used that knowledge to build a modest portfolio that we now live off the interest.

    The market today is dominated by speculators supported by computer programs. As my mentor told me back then, speculators wake up screaming in the middle of the night in absolute terror that the will be caught holding a high value position when the market drops. That hasn't really changed. Anything that can be construed as negative is seen by the speculator as a threat to his plan to ride the stock to the top of the market, sell it off and watch a bigger-fool take the loss while he drives up the price of another stock.

    Unfortunately, there are few places for the investor to invest his money today and the speculators drive the market into wild swings as they sit like the frightened little boys that they are - terrorized by the idea that they could be holding a large position when the stock price falls. Hence an innocent article sends stock prices into a tailspin.

    Meanwhile the speculators want the average Joe back in the market to buy-high and sell-low so that the speculator isn't caught with a high value position when it all comes crashing down - after all that is what the average Joes are for.

  38. Speculators are backed by the policy of the Fed. The Fed's low interest rate policy has forced people into stocks. The Fed's loose monetary policy has also provided liquidity for speculation.

    These policies hurt the average American but they benefit big government (by providing low-cost debt financing) and the wealthy (by making their asset prices increase). Let's keep waiting for Yellen's "wealth effect" to trickle-down.

  39. The Fed is doing what is has been doing because the legislature refused to act to promote a healthy economy, and instead focused on debt/deficit reduction (you do that during a strong economy), voting to repeal the ACA forty some times, and making sure as little good would happen under dem leadership.

    Market speculation existed long before the 2008 financial crisis/recession.

  40. NYC created an artificial market for medallion taxis,with it's arbitrarial limit,on the number issued. Had the city opened the taxi business,to anyone who wanted to buy a medallion years ago,they would be worth a tiny fraction,of what they now sell for. And there would be many more taxis available. With lower fares,and more profit for the owners and drivers.

  41. " If the stock market is efficient, why would a single Upshot article on taxicab medallion prices help push down Medallion Financial’s stock 7 percent in a single day, when most of the information in that article was already public?"

    Medallion Financial deals in stocks of a public common good, namely urban transportation-taxis. Even though information was circulating among market operators, the NYT piece reached a wider audience. That, in turn, caused herd panic behavior among operators and stock prices dropped precipitously. The market operated in a highly efficient manner.

  42. Ben Graham, Warren Buffett's mentor put it well, when he spoke of Mr. Market, who can alternate in moods from elated to depressed. Over the long term, stocks tend to trade more or less efficiently, but over the shorter term, all 'bets' are off.

    I remember in March of 2009 when the price of Ford stock
    shares dropped to close to $1 per share, today they trade at around $17. Clearly it was fear of pending doom and collapse of the general economy which prompted this reaction, not the true worth of the company. Buffett understands this dynamic well and has made bundles of money by buying good companies when their shares were trading at depressed levels.

  43. It's not called "the Perfectly Efficient Market Hypothesis". Inefficiencies do exist.

  44. Economics is a social, not natural, science, and its rules do not claim to be perfect representations of reality. In natural science, you can talk about opposite magnetic poles repelling, and it happens 100% of the time. In social sciences you can only approximate general behavior, sometimes very closely, at other times roughly. You did not disprove, or even undercut, the efficient market hypothesis, as your title suggests (unless you think that the hypothesis claims to be 100% accurate, which no reasonable person believes.) You merely demonstrated that it is not a perfect representation of market behavior, which every reasonable person already knew.

  45. Plenty of EMH faithful talk as if they believe EMH is more than a rule of thumb, e.g., that arbitrage and bubbles don't exist (Fama himself said he doesn't know what a bubble is, doubts its existence).

    As for hard science, certainty and replicability may be more in evidence than in the social sciences, but there is plenty of probability (e.g., genetics and quantum mechanics) and lack of complete information (will the asteroid/comet hit earth or not?).

  46. Josh,

    You claim that TAXI sold off 7% because of your NYT piece. How do you know that? How do you know that it wasn't a hundred other reasons? Perhaps, it was due to your article or maybe it was simply part of the larger downward trend -- after all, the stock is down nearly 30% year-to-date. Again, how do you know? Maybe new financial information came out and was priced into the stock or maybe it was a large sell order that affected a small probably illiquid market. Unfortunately, you've made a pretty common error that business journalists make all the time: attributing stock movements to this or that reason without actually knowing what truly moved the price.

  47. The easy answer to that is to print another article (which will have the same audience as the article in question) and ask the sellers to post their answers on why they sold. If no one responds, then the article likely had little/no effect.

  48. Warren Buffet has been talking about the difference between intrinsic value and market value for many decades. The market is a voting machine in the short term and a weighing machine in the long term. And in the long term we are all dead.

    It's not new news that humans are neither rational nor efficient. What still surprises me is how few people even understand that a reasonable valuation for a stock is the discounted price of future earnings. When many stocks don't even pay earnings. Lets face it the market is full of speculators not investors.

    The more liquid the market the more the small group of investors can eat the speculators for lunch over the long term. But small markets over the short term are rife with deviations which can be taken advantage by those whose costs for analysis and action is lower than others.

  49. the theory is about the market in general and not a single thinly traded security. If everyone in the market owned shares and the the market were completely liquid and the daily share volume were nearly infinite, then perfect pricing may make sense. This is not a surprise at all. At some level, every buyer of securities has a point of view that says fair value is below the price they are buying it. I have always asked asset managers to provide an current view and trend of their internal view of fair value. There is almost always better than a 20% differential between market value and fair value estimates. Of course, the real issue is whether they are right

  50. The cliche is that 'news does not move markets.' It is a lie. News that Russian tanks have rolled across the border into the Ukraine and Putin has threatened nuclear response to NATO should it take any action, would move markets quite a bit for example. Then the markets would assess the response and the effect and adjust.

    Publishing what informed people already know to the general public always causes the inside market to react and adjust to more people being aware of a storyline or fact set that might be at variance with their interests and public relations. Investors can tell their brokers to steer clear until the smoke settles and cut back on positions.

    If we look at the history of Apple and its stock performance we see the hyperventilating effect again and again, along with the effect of market prognosticators. In the end though, if they sell enough cell phones and other devices to capitalize as the largest corporation in the world, their stock price is going to weigh that more than some buzz cut with a beard on Buzzfeed going bonkers on their natty software glitch in the latest release of iTunes or operating system.

    If we're looking at industries that are on the latest application driven fault lines of consumer behavior such as Uber and medallion valuation, we are looking at much smaller markets that are small capital markets and have fairly inefficient options at their base trying to adjust to an uneven playing field with uncertain regulation.

  51. The real surprise here for casual observers is that taxi medallions in New York City cost a million dollars. That's apparently due to an artificially constrained supply - a government created oligopoly. We see similar results with other regulatory monopolies (doctors, lawyers, cable companies). So, by limiting entry into the market, the government creates wealth in a select few. There may be sound policy reasons for limiting entry (e.g., professional competence, avoiding multiple telephone poles on every street), but the fact remains wealth creation is often the result of government policy. And consumers pay for that, through higher cable bills and taxi fares, among others. But whenever offsetting policies are proposed, such as higher taxes on the wealthy, we are told that is simply class warfare and we should let efficient markets rule. There is nothing efficient about that, except the ability of this government-bestowed wealth to propagate those favorable policies through lobbying and buying elections.

  52. Government regulation or service provision in monopoly/oligopoly situations or situations involving infrastructure often does the opposite of what you say - keeps private entities from abusing their customers, the public, and killing off their competition. E.g., municipal internet is generally faster and cheaper than that provided by the private sector monopolies/oligopolies. Regarding taxi medallions, however, I have no knowledge of the "reasoning" behind the medallion cost, but it does constitute a barrier to entry similar to barriers to entry of large fixed cost industries (e.g., cars).

  53. At best, EMH can be viewed as a general rule of thumb for those parts of the market that are higher profile, but arbitrage opportunities do exist (here, between those who were aware of the publicly available info and those who were not) even though EMH proponents will define things in such a way, and use circular reasoning, to say that is not the case.

    An example of market prediction of temporal arbitrage:
    In 2003, the stock indices were down supposedly because of "uncertainty" over when the U.S. would invade Iraq. I thought that was stupid but realized it implied that investors would bid up the market once we invaded, also stupid, and then as in the 1987 crash, take their profits later than day or the next. So, I bought low, sold when we invaded and the market went up, and then sold short so when the market went down again, I profited again. This opportunity was apparent weeks in advance and its existence can't be explained by EMH.

    The superbowl index was another example (NFC wins, market rises; AFC wins, market drops) of a self-fulfilling belief - the response, to invest based on what one thinks that others will do, may be rational albeit self-fulfilling herd behavior and speculation, but it is in response to nonsense regarding a superbowl win which EMH can not explain.

  54. Over the long term, the market is pretty efficient. In the short term, however, it can be as irrational and panicky as a matron with a mouse up her dress.

  55. Over the long term, the market is pretty efficient. In the short term, however, it can be as irrational and panicky as a matron with a mouse up her dress.

  56. Josh Barro, I am disappointed on the way you portray me Larry Ionescu as being at peace that I am being robbed by the Chicago's mayor of my business which I spent over 20 years to build.i am not at peace with that and I am not planning to go out of business anytime soon.
    I mention to you the fact that medallion owners pay over $4,200,000/year to renew 6900 licenses each year where Uber and Lyft if they have 10,000 cars will only pay about $250,000 together ....what a sweet deal . I also mention to you that it takes about 3 months to get a chauffeur license, where it takes just about 30 min to became a Uber driver.
    I also mentioned to you that no business in this country can compete with a unregulated business and because of that medallion owners are at a disadvantage . Level the play field and this apps will not survive.
    Uber and Lyft operated in Chicago for 3 years without any rules any taxes paid. Why not go back and charge them proactive the $3.5/day ground transportation tax. Chicago it's broke financially and dolling out free meals to billionaires from Silicon Valley it's not fair to the tax payers.
    Add to that the fact that taxpayers were receiving about $17,000 for each medallion transaction or 5% of the selling price. Or about $1,000,000/month
    What do they get from Uber/Lyft ?.....nothing
    If the tax payers , medallion owners and cab drivers are being victims .....who it's behind this scheme ?

  57. There's only one type of market efficiency that matters - can investors, consistently, guess where stock prices are headed before the market does? If so, we can all make millions and retire at 25. Errant price movements based on New York Times articles are hardly proof that we can. Practically speaking, financial markets are as efficient as a diamond is hard.

    Robert Bradley
    Author, Investing In Four Hours

  58. I beg to differ with your premise that the stock market is not efficient.

    As you stated in your article, the price of Medallion Financial already dropped significantly prior to your article. The post-article 7% drop was a response by 1. "ribbon clerks" (investor amateurs) reacting to news they did not know about a stock they owned and/or savvy investors shorting the stock knowing the ribbon clerks would be selling on the news. The big short sellers were probably in and out very quickly with a return of less than 7% that day or they went long when it appeared the stock bottomed out.

    All your article proves is that knowledge is everything to the sophisticated investor, especially Hedge Funds with lots of money and quick response time. Sadly, it also vindicates Prof. Gruber's smug arrogance when he said Americans are stupid. He should have given that a bit more clarification rather than the broad brush. Nevertheless, when it comes to Economics and Finance, he was right. The large % of our citizenry know little or nothing about the system.

  59. "If the stock market is efficient..."

    DOG BITES MAN! There's no theory which denies that stock prices fluctuate daily in response to news, rumor, chatter or random events. What would truly be shocking is if most people naively believed in the "efficiency" of markets after the events of the past 20 years.

    "Efficient" is a valid design standard for an engineer -- fuel-efficiency, for example. It's simply the wrong way to think about financial markets in which prices are set by competing traders with dissimilar investment goals, information, and risk preference. How academics can compare the gyrations of the markets to an engineer calculating optimizations in the lab, that is the real mystery.

  60. What you found out is that capitalism is a failure and anyone who participates in the scam that is Wall Street is a fool.

  61. BEWARE
    If Uber and Lyft are not shut down by Federal Agents for violating all our laws and defrauding the US Government, then invariably the entire livery industry will self deregulate and the medallions are worth nothing. This seems to be the direction the industry is headed.

  62. Of course real economist has believed in perfect rationality since at least 1956 when Herbert Simon introduced the notion of Bounded Rationality.