Posts Tagged ‘markets’

Assets: There Is No “Value”, Only Price

December 3, 2010

I did something weird (for me) last year: I wrote an economics paper. This was weird, because by profession I’m an astrophysicist. It was also unproductive, since I could not persuade editors at any of several economics journals that an astrophysicist might have anything useful to say about asset pricing. So after three submission attempts (none of which even got to a referee) I gave up.  The thesis of the paper — that the notion of “value” of an asset, which underlies the Efficient Market Hypothesis, has no meaning, because asset markets have no stable price equilibria — evidently only persuaded the editors of these journals that they were dealing with a crackpot.

Nonetheless, I believe that there are valuable ideas in the paper. It’s a bit technical (although anyone with a little training in differential equations ought to be able to read it), but the main ideas can be described reasonably clearly without resorting to math. At least, that’s what I’m going to attempt to do here.  After all, it’s in the finest tradition of crackpottery that we publish our stuff ourselves…