Re: poly: Why interest rates may stay low

From: Robin Hanson <>
Date: Fri Feb 27 1998 - 12:59:15 PST

I wrote:
>> 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 ...

Perry responded:
>And yet, this isn't what has been happening.
>Cisco Systems sells completely non-proprietary products ...
>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 --

A single example of a company making a giant ROE does not even weakly
discredit claims about the expected ex-ante ROE. You might as well
point to individual lottery winners and conclude the lottery is a good
deal. Perhaps before you disprove theories, you should understand
what they say.

Robin Hanson
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614
Received on Fri Feb 27 21:07:50 1998

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