Re: poly: On Simple Models (Was: Why interest rates may stay low)

From: Perry E. Metzger <>
Date: Tue Mar 03 1998 - 13:50:34 PST

Robin Hanson writes:
> >You wouldn't always expect that -- indeed, you often would not expect
> >that. For instance, if I am investing in a radio broadcast license (we
> >will ignore whether such licensing is desirable right now), the cost
> >of the license these days is generally nicely proportional to the
> >expectations on the part of bidders of their likely return on
> >investment.
> You've completely lost me here. Care to rephrase?

The cost of a radio station depends on how much money it makes, just
like almost any other investment.

> >Pretending that we can exactly measure the rates of return in 1890 or
> >1650 also seemed a bit odd. You were claiming that rates of return
> >haven't changed -- I challenged people to find a way to actually
> >measure that. ...
> >If, on the other hand, you start discussing "historical rates of
> >return" etc., I start having an alarm go off.
> This is from a rather different discussion, of the suppy side of
> investments rather than the demand side you and I've been discussing.
> There is a literature where people estimate these sorts of returns,
> and I conveyed the results I recall.

They sound very much like the previous estimates I've heard.

I've always wondered very seriously about how accurate such estimates
could possibly be. Given that I can't think of a reasonable way to
estimate how much "the" [sic] rate of return is today, I don't know
how I'd go about estimating it in a world where the instruments being
invested in were radically different.

Hell, I don't even give the government inflation figures much credence
except as an extremely rough indicator.

Received on Tue Mar 3 21:53:21 1998

This archive was generated by hypermail 2.1.8 : Tue Mar 07 2006 - 14:45:30 PST