Sorry, I meant in the sense some places you see and some places not and this should inform your choice.
Efficient markets is like every hypothesis, it has various probabilities of working in various conditions. Usually we need a fluid market, something that is not like De Beers diamonds, but more like a market with a million homes on a city and hundreds of thousands of speculating homeowners. A market where it is easy to be a vendor and thus collusion and rigging is unlikely. Where the barrier to enter is low. Houses are really close to an ideal market, you won’t start a mutual fund tomorrow, nor open a Michelin-star restaurant, but you could be landlord really easily. Suppose you don’t want to profit in such a market just prevent others from profiting off you i.e. save that kind of money, which is the renters dilemma. Then the algorithm is really simple 1. is anyone profiting off me? 2. are there a lot of people profiting off people like me?
Renter who rent from private landlords can make an efficient decision just by inviting the guy over to a beer or five. You have no job? Rent out ten apartments and basically do this for a living? You have a nice car and holidays in good places? Well, fuck you I am off to buy a house :)
I think the question is whether someone may be leeching you off needs not be a theoretical question. This is what I mean under efficient markets: if you don’t see a leech, and see an improvement opportunity nevertheless, be aware of hidden costs.
You have a nice car and holidays in good places? Well, fuck you I am off to buy a house :)
Well, as Marx could have told you, you need the initial capital to start :-D
But yes, it’s a common way of earning money. Typically you buy a house in dire need of TLC (because it’s cheap), fix it yourself, and then rent it. There are a lot of people who are landlords and rent is their primary source of income.
It’s not all roses, of course—it’s just a business and like any business it has its own failure modes.
But as Mises would tell you, capital is not necessary as you can borrow money and still pocket the entrepreneurial profit and managerial salary, having to pay only interest, now whom to believe :-D
I am joking, of course, capital being difficult / expensive to acquire is one of the primary problems of real-world market economies, in the ideal market simply presenting a good business plan, even without any sort of a collateral would get other people’s money thrown at it which requires perfect trust and perfect trustworthiness. Markets where only people who already have capital can engage in entrepreneurship end up with nasty outcomes, not only high inequality but also crappy entrepreneurs the customers must put up with.
in the ideal market simply presenting a good business plan, even without any sort of a collateral would get other people’s money thrown at it
Well, Silicon Valley functions more or less like this. Hedge funds can look like this, too.
Markets where only people who already have capital can engage in entrepreneurship end up with nasty outcomes
That’s basically a counterfactual—businesses have been able to borrow money for a very long time in human history :-)
In reality the situation is a mix: it’s not quite true that “A bank will only lend money to someone who can prove he doesn’t need it”, but it’s also not quite true that a solid business plan is all a bank needs to lend you money. Banks are sufficiently rational to want to have positive-expected-returns loans—they will lend money if they think the loan will be good.
I also suspect that entrepreneurship is noticeably easier in the US than in Europe.
We do.
“Efficient markets” are an idealized abstraction. Putting trust in such seems to be… not wise :-)
Sorry, I meant in the sense some places you see and some places not and this should inform your choice.
Efficient markets is like every hypothesis, it has various probabilities of working in various conditions. Usually we need a fluid market, something that is not like De Beers diamonds, but more like a market with a million homes on a city and hundreds of thousands of speculating homeowners. A market where it is easy to be a vendor and thus collusion and rigging is unlikely. Where the barrier to enter is low. Houses are really close to an ideal market, you won’t start a mutual fund tomorrow, nor open a Michelin-star restaurant, but you could be landlord really easily. Suppose you don’t want to profit in such a market just prevent others from profiting off you i.e. save that kind of money, which is the renters dilemma. Then the algorithm is really simple 1. is anyone profiting off me? 2. are there a lot of people profiting off people like me?
Renter who rent from private landlords can make an efficient decision just by inviting the guy over to a beer or five. You have no job? Rent out ten apartments and basically do this for a living? You have a nice car and holidays in good places? Well, fuck you I am off to buy a house :)
I think the question is whether someone may be leeching you off needs not be a theoretical question. This is what I mean under efficient markets: if you don’t see a leech, and see an improvement opportunity nevertheless, be aware of hidden costs.
Well, as Marx could have told you, you need the initial capital to start :-D
But yes, it’s a common way of earning money. Typically you buy a house in dire need of TLC (because it’s cheap), fix it yourself, and then rent it. There are a lot of people who are landlords and rent is their primary source of income.
It’s not all roses, of course—it’s just a business and like any business it has its own failure modes.
But as Mises would tell you, capital is not necessary as you can borrow money and still pocket the entrepreneurial profit and managerial salary, having to pay only interest, now whom to believe :-D
I am joking, of course, capital being difficult / expensive to acquire is one of the primary problems of real-world market economies, in the ideal market simply presenting a good business plan, even without any sort of a collateral would get other people’s money thrown at it which requires perfect trust and perfect trustworthiness. Markets where only people who already have capital can engage in entrepreneurship end up with nasty outcomes, not only high inequality but also crappy entrepreneurs the customers must put up with.
Well, Silicon Valley functions more or less like this. Hedge funds can look like this, too.
That’s basically a counterfactual—businesses have been able to borrow money for a very long time in human history :-)
In reality the situation is a mix: it’s not quite true that “A bank will only lend money to someone who can prove he doesn’t need it”, but it’s also not quite true that a solid business plan is all a bank needs to lend you money. Banks are sufficiently rational to want to have positive-expected-returns loans—they will lend money if they think the loan will be good.
I also suspect that entrepreneurship is noticeably easier in the US than in Europe.