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Comment by gvd | Hacker News Reader

I really hate this "markets are efficient" bullshit. The markets are too slow because they don't incorporate the true cost of stuff. The environment is going to shit and by the time the markets have incorporated that cost, it is too late.

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Markets are efficient in the sense that you can't personally make money by trading stocks, not in the sense that the economy is optimal for society as a whole. Pollution is the classic example of a negative externality that harms society by offloading part of the cost of individual behavior to others. But you can't personally make money by exploiting the societal inefficiency of pollution. (In game theory terms, not every Nash equilibrium is a Pareto optimum.)

> The environment is going to shit and by the time the markets have incorporated that cost, it is too late.

I'm not sure that measuring externalities like that are what markets are for.

In the context of this post, for example, the author seems to be casting a pretty narrow net here, and talking about whether market prices are accurate measures of what other people are willing to pay for a thing.

To speak of markets as serving society poorly by not incorporating environmental impacts is to speak of other than what he is talking about when he says "markets are rational".

I think he is referring to publicly traded markets, like stock exchanges.

The less liquidity, the more inefficiency there is...the environment being an extreme example...

There would seem to be a gap in the market for indices of climate-linked prices, then people could discover trends, and perhaps trade on their perceptions of mis-pricing.

See my detailed comment here:

https://news.ycombinator.com/item?id=37172299

Can I sell you my apartment in Miami? Would you park your Ferrari in the basement?

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