In the long run, the smarter agents in the system will tend to accrue more wealth than the dumber agents.
Only if the smarter agents also have similar amounts of capital as the dumber agents. As Delong, Shleifer, Summers and Waldman showed, dumb agents can force smart agents out of the market by “irrationally” driving market prices up or down far enough to exhaust the limited capital reserves of the smart agents.
Only if the smarter agents also have similar amounts of capital as the dumber agents. As Delong, Shleifer, Summers and Waldman showed, dumb agents can force smart agents out of the market by “irrationally” driving market prices up or down far enough to exhaust the limited capital reserves of the smart agents.