Re: [tlug] Open-source Japan

[Curt Sampson <cjs@example.com>]

On 2009-03-04 16:29 +0900 (Wed), Stephen J. Turnbull wrote:

> All I'm saying here is that it's not the market's fault that it's hard
> to evaluate the value of some goods.

Well, we're in agreement there. I'm not blaming the market either; a can
only add information to the system (even if that be as little as where
to go to buy or sell something--but it's often much more than that).

On 2009-03-04 17:15 +0900 (Wed), Stephen J. Turnbull wrote:

> But in fact, the prepurchase information that you get about an
> automobile, or its manufacturer's stock, is fairly untrustworthy (in
> the sense of being imprecise).

Of course; I never have perfect information about anything.

Let me be more clear about what I am trying to say. There are three
kinds of information I may have about a particular thing I'm trying
to purchase: true information I know to be true, false information I
believe to be true, and information I know I do not have. My opinion
is that, to make markets most "fair," we want first to minimize
false information believed to be true, and after that maximize true
information known to be true. As this is less the case, a greater
percentage of spending on the market is wasted, from the buyer's point
of view, and buyers a) become more reluctant to take the risk of buying,
and b) spend more money on verifying information, leaving less to make
actual purchases.

So the best outcome for the group is to be absolutely honest. However,
in a classic game theory problem, being absolutely honest will not
necessarially lead to the best outcome for the individual. In some
cases, the best outcome will come to an individual only if others
co-operate; in other cases co-operation of others doesn't even matter,
fraud will always produce a better outcome (in the short run) for that
individual regardless of the circumstances. (In the long run, the
individual's progeny are likely to lose out because of the way a lot of
this hinders economic growth.)

This is essentially an argument for regulation.

>  > People tend to be much more reluctant to buy there than on the NYSE
>  > because of the unreliability of the information and consequent
>  > number of scams, and thus it's also a much worse place to go to
>  > raise capital.
> 
> Deliberate fraud is another matter.  I don't think that's what Shawn
> was referring to.

Ah. Well, that's what I was referring to.

> [Off-topic: I also suspect that the VSE has a lot of inherently
> volatile small-cap issues, making it more risky in general.  It's not
> obvious to me that it's the risk of scam per se that makes people
> reluctant to buy there.]

Not to you, no. I'm familiar with what goes on in the VSE (or what was
going on there in the '90s), and I saw quite a lot of things that would
not be anywhere near acceptable for companies listed on the NYSE, and
which in my opinion were certainly misleading investors.

cjs
-- 
Curt Sampson       <cjs@example.com>        +81 90 7737 2974
           Functional programming in all senses of the word:
                   http://www.starling-software.com