There is no invisible hand

Steve,

More proof that people are crazy. We just need crazy models to describe crazy behavior.
SE would be a great case study. Plenty of crazy to go around.

by the way Steve, have you heard of 'the stranger'?

You mean Albert Camus' novel? Yup. I was big into Existentialism at one time.

>>>Wall Street brokers who peddled stocks they knew to be garbage exploited the irrationality that Kahneman and Smith exposed.

Soon you will be able to substitute "wall street" with "real estate"

This article misses the mark in my view. They're correct in voting against the Efficient Market Hypothesis, but not for the reasons cited in the article. The real issue is that information is not equally accessible to all and if it is "available" it is easier for some to gain access than others. Credit Swaps market is one such example where the dealer cartels(banks) have access to data that the other side does not. There are tons more examples.

The other issue is complexity. Investment instruments are highly complex these days, which makes it hard for investors to say, 'I don't like your subordination level,' or 'I don't like the lack of geographic diversity in your loan pool.'

All an investor can do is either buy it, or not buy it. There's no nuance, no way to say I like part of your security but not all of it.

So people buy investments they don't like when external conditions prompt them to do so: when the alternatives are just as bad, or worse, and they have to deploy some capital.

But that does not lead in the long run to a balanced market, in which the buyside has just as much clout as the sellers.

Complexity creates an advantage for the sellers, and the invisible hand does not have any way to offset that.

Article even provides the basis for disproving the rationale:

To most market participants - and, indeed, ordinary observers - this does not seem like big news. Wall Street brokers who peddled stocks they knew to be garbage exploited the irrationality that Kahneman and Smith exposed. Much of the mania that led to the bubble economy was based on exploiting investor psychology.

The brokers had information that the stocks were worthless, information not readily available to the suckers buying the stocks.

steve, thank you for thinking so much of me.
Albert Camus.....HAHAHAHAHA!
I was refering to 'the stranger' as in sitting on your hand for about 30 minutes or until if fell asleep.
then the hand feels 'like a stranger' and I'm not talking about pulling your leg.

hence the idea that there IS an invisable hand

I wish I had an invisible hand

Somebody up above is wanking with an invisible hand: nothing like Riversider saying that Nobel-prize winning economists are wrong. Hacks like Bernake I could see, but....

Nobel prize winning economists who say things that Riversider disagrees with are wrong. Word has it that there is a picutre of Paul Krugman on Riversider's dart board...

Socialist, that was a poor attempt to be witty. Normally you have a photograph with your posts or something else that captures the reader's attention. This latest post relies solely on people caring about what Riversider is doing, which is on par with what you are doing, or for that matter, what I'm doing - which is why you'll rarely if ever see me post about what I am doing or what is going on with my family or business or personal life - nobody gives a crap.

By the way, I still never figured out, why did w67thstreet say "Of the thousands of people who touched my wife"?

On the one hand, I don't care about his family. On the other hand, I kind of wonder ... thousands?