Re: poly: Why interest rates may stay low

From: Perry E. Metzger <>
Date: Fri Feb 27 1998 - 12:50:27 PST

Robin Hanson writes:
> So regardless of how much technology makes investments
> intrinsically profitable, without property rights the
> average return on investment stays at the marginal rate,
> which is determined by our evolutionary heritiage on
> discounting time, at 1-2%/year. And to the extend that
> growth rates are tied to the average return on investment,
> growth rates will also say moderate.

And yet, this isn't what has been happening.

Cisco Systems sells completely non-proprietary products and yet none
of their competitors are the least bit effective -- virtually every
bit you send out on this mailing list travels through their equipment
a dozen times. Bay Networks might as well not exist. Even so, Cisco
makes giant ROE's and huge profit margins -- so huge that you'd think
that everyone on earth would be in the business.

I think I understand why, too.

"The world isn't frictionless."

I'm reminded of all the beautiful results that say that markets should
be perfectly efficient and thus speculators like George Soros
shouldn't exist or "must be" statistical anomalies. And yet they
exist. Why? Because the theories are in fact not perfectly accurate --
just mostly accurate -- and the gap between "mostly" and "perfectly"
leaves a space in which hundreds of people manage to become

Information isn't perfectly exchanged. People can't instantly learn
new trades. Engineers and managers aren't fungible. All marketing
people are not equal.

Received on Fri Feb 27 20:56:23 1998

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