Re: What’s the deal with conservatives, economists, and the minimum wage?
On Jan 19, 2007, at 9:37 AM, Willy Greenfields wrote:
Doug wrote:
There’s nothing to make people think the price of an asset at time t+1 will be greater than the price at time t than the fact that the price at time t is greater than that at t-1, and t-1>t-2, etc.
You and Woj seem to be talking about two different things. Woj’s basically on about discounted cash flow whereas you’re invoking the greater fool theory. Woj is very much correct in theory. You are correct from a practical standpoint (most markeet participants are not securities analysts).
I’m talking Keynesian theory, which is that expectations for the
future (which are, after all, what are plugged into a discounted cash
flow analysis) are formed by recent experience. There is also the
rational bubble argument, the polite term for the greater fool
theory, which holds that it makes sense to buy a security you know is
overvalued if you think you can unload it in the future at a higher
price.
Doug