Re: poly: Re: Why interest rates may stay low

From: Robin Hanson <>
Date: Wed Mar 25 1998 - 11:20:13 PST

Peter McCluskey writes:
>>>>4) Mass and energy ... nearby ... can become a bottleneck resource,
>>> Can you think of a better way to compare value ... ? ...
>>You don't need physical trade to get market comparisons. ...
>How does that clarify anything? If you observe people value 1 gram here
>and now the same as the promise of 10 grams later, that gives you one ratio
>with information about the combined effects of discount rates and relative
>bottlenecks. Do you have a way of separating those two effects that doesn't
>involve something similar to my assumptions?

I don't think you can do what you're trying to - constrain real rates of
return just by calculating a simple mass ratio. I think you have to use
some economic theory to make a best estimate of rates of return. That means
thinking about prices.

>>... the lack of much investment in this now ... suggests investors don't
>>anticipate such huge future returns. From which I conclude that such huge
>>future returns are unlikley. What do you conclude?
>... Investors ... almost always decide based on history that it would be
>better to wait until the changes involved appear to be a decade or so away.
>... been persistent patterns ... wasting their time or deluding themselves.
> The fact that my hypothesis bears more resemblence to typical crackpot
>theories than to ideas that have been valuable to investors in the past
>certainly makes me nervous, but the lack of investor interest in them
>adds virtually no information to that.

Could that insensitivity be changed by knowing just how carefully investors
have considered the types of arguments that persuade you? Does anyone know
what happens when space fans pitch long-range projects to big investors?

>If I didn't think that were an adequate explanation for low savings
>rates, I would hypothesize that people's discount rates have been rising
>recently above the long-term average that you assume is stable.

I'll try to post more on this topic soon.

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 Wed Mar 25 19:25:44 1998

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