I think that this is a misuse of the idea that markets are anti-inductive. That is just a rephrasing of the efficient markets hypothesis, that some markets are efficient. But you definitely don’t expect all markets to be efficient, only very liquid ones. The price of Apple’s stock may be hard to predict, but the real phenomenon, the number of iphones sold next year is pretty easy to predict, it’s just baked into the price. If you know that it’s wrong, you can move money from other stocks into it or vice versa. But if you know that the whole market is wrong, it’s much harder to fix. So the trajectory of the whole market could be more predictable than that of a single company.
And the business cycle is not about stock market prices. It is about the real economy, the part that has more momentum. Maybe it’s about the market for labor, but that market is definitely not efficient. It’s not a commodity. People vary widely in their skills, even the same person over the course of a few years. Hiring someone is a long-term risky investment, not so sensitive to the price of labor.
I think that this is a misuse of the idea that markets are anti-inductive. That is just a rephrasing of the efficient markets hypothesis, that some markets are efficient. But you definitely don’t expect all markets to be efficient, only very liquid ones. The price of Apple’s stock may be hard to predict, but the real phenomenon, the number of iphones sold next year is pretty easy to predict, it’s just baked into the price. If you know that it’s wrong, you can move money from other stocks into it or vice versa. But if you know that the whole market is wrong, it’s much harder to fix. So the trajectory of the whole market could be more predictable than that of a single company.
And the business cycle is not about stock market prices. It is about the real economy, the part that has more momentum. Maybe it’s about the market for labor, but that market is definitely not efficient. It’s not a commodity. People vary widely in their skills, even the same person over the course of a few years. Hiring someone is a long-term risky investment, not so sensitive to the price of labor.