Pretty Gnostic Machine3d ago

Adam Smith's model works as a first approximation of coordination.

But it breaks when:
-power concentrates
-information is uneven
-costs are hidden
-humans behave irrationally - the baseline, not the exception.

So markets don't always self-correct, they can lock into distorted patterns.

Show threadJack William Bell2d ago

@PrettyGnosticMaschine

I keep telling people Adam Smith's 'Free Markets' were not free from rules, they were free from *rents*. Which, for example, occur when power is concentrated and information is hidden; allowing players to arbitrage between two market participants who don't know each other.

He was fully aware of all these things, except I do think he believed people would behave rationally in most cases – which is patently *not true*. Forex the stock market reactions to lies about Iran.

Show threadlankohr
@jackwilliambell @PrettyGnosticMaschine I don't remember much from his work, but the keypoint i remember was the theory that "quality will win". And i believe he just underestimated human dumbness.
Mar 26 at 7:08pmMastodon for Android
Show threadPretty Gnostic Machine2d ago
@lankohr @jackwilliambell Fair point. He assumed a cleaner playing field than reality. Quality matters, but noise and human bias scramble the outcome
Show threadJack William Bell2d ago

@PrettyGnosticMaschine @lankohr

To expand that a little more: I believe there's a special kind of stupidity which arises from bias and from ignoring data which doesn't support the bias. The end result is even smart people doing very dumb things.

Show threadPretty Gnostic Machine1d ago
@jackwilliambell @lankohr I've been guilty of that. Intelligence doesn't immunize you, it just gives the bias better arguments. You start curating reality instead of reading it, and suddenly the model is serving the ego, not the truth.
Show threadJack William Bell1d ago

@PrettyGnosticMaschine @lankohr

We've all been guilty of it. It's a very human thing.