Preface and Acknowledgments
Note:PRE@@@@@@@@
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a generalized notion of efficient markets,
Note:L ARGOMENTO ESTESO AL MONDO DELLE IDEE
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where smart individuals should generally doubt that they can spot overpriced or underpriced
Note:COS È EMH
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Suppose, for example, that someone thinks they can easily build a much better and more profitable social network than Facebook,
Note:ESEMPIO IDEA
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Should they question whether they can “beat the market”
Note:COME METTERLA ALLA PROVA? COME VALUTARLA? COME LE IDEE SPECULATIVE?
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1. Inadequacy and Modesty
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“When should I think that I may be able to do something unusually well?”
Note:UN VECCHIO PROBLEMA
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Could they really know better than my doctor? Would I be able to tell if they did?
Note:POSSO ESSERE MEGLIO DEL MIO DOTORES?
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if there were reachable fruits, wouldn’t academics be taking them?
Note:NOI E L ESPERTO
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Will I be able to find any good ideas that aren’t already taken?
Note:NOI E GLI IMPRENDITORI
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GiveWell
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Where should they look to find things that our civilization isn’t already doing about as well as can be done?
Note:NOI E I BENEFATTORI
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I use what feels to me like a natural generalization of the economic idea of efficient markets.
Note:EMH X RISOLVERE QS PROBLEMI
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what kinds of efficiency we should expect to exist
Note:LA BASE DELLA RISPOSTA
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the message of modesty tends to be: “You can’t expect to be able to do X that isn’t usually done, since you could just be deluding yourself into thinking you’re better than other people.”
Note:IL PUNTO DI VISTA DELLA MODESTIA... SI INTENDE CONFUTARLO
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It looks like you’re venturing outside of your area of expertise
Note:ANEDDOTO XSONALW... GIUDIZI SULL ECONOMIA GIAPPONESE...RICETTE DA UN PROFANO X USCIRE DALLA CRISI
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“How do you claim to know this?” is a very reasonable question
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I wasn’t making up my critique of Japan myself; I was reading other economists and deciding that I trusted the ones who were saying that the Bank of Japan was doing it wrong…
Note:BANCARELLA
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How likely is it that any outsider would be able to spot an obvious flaw in their policy?
Note:IL BOARD DELLA BOJ È COMPOSTO DA ESPERTI SPECIALIZZATI
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How likely is it that a non-professional could not just suspect that the Bank of Japan was doing something badly wrong, but be confident in that assessment?
Note:BATTERE GLI ESPERTI
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Surely some humility is appropriate when criticizing the elite decision-makers governing the Bank of Japan.
Note:L UMILTÀ SEMBRA LA VIA GIUSTA
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“modest epistemology.”
Note:DEFERENZA VERSO GLI ESPERTI
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The Dunning-Kruger effect shows that unskilled individuals often rate their own skill very highly.
Note:MOTIVI X ESSERE UMILI
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a correlation between how competent a person is and how competent they guess they are,
Note:UN COLLEGAMENTO MOLTO DEBOLE
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Hal Finney has endorsed “abandoning personal judgment on most matters in favor of the majority view.”
Note:LA STRADA DELLA MODESTIA
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the average opinion of humanity will be a better and less biased guide to the truth than my own judgment.
Note:FINNEY
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Finney hopes to correct for overconfidence
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“You see that someone says X, which seems wrong, so you conclude their epistemic standards are bad. But they could just see that you say Y, which sounds wrong to them, and conclude your epistemic standards are bad.”
Note:LO STALLO CHE HANNO IN MENTE I MODESTI
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But if I reject arguments of the form, “We disagree, therefore I’m right and you’re wrong,” how can I claim to be correct
Note:L ALTERNATIVA AL DISACCORDO IPOTIZZATO DAI MODESTI
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The other viewpoint, opposed to modesty—the
Note:UNA LUNGA INTRO ALL ALTERNATIVA
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if you think you have spotted a $20 bill lying on the floor of Grand Central Station (the main subway nexus of New York City), and it has stayed there for several hours, then it probably is a fake $20 bill, or it has been glued to the ground.
Note:TORNIAMO A EMH
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the peak of all human power of estimation,
Note:VALUTAZIONE ACCURATA
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the price of S&P 500 stocks relative to other S&P 500 stocks over the next three months.”
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Millions of dollars are offered to smart, conscientious people with physics PhDs to induce them to enter the field.
Note:SUPERPROFESS
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as good as it gets on modern-day Earth.
Note:CONDIZIONI IDEALI X LA PERFEZ
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I don’t think I can beat the estimates produced by that process.
Note:TENTAZIONE DELLA MODESTIA
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If your uncle tells an anecdote about how he tripled his investment in NetBet.com last year and he attributes this to his skill rather than luck, we know immediately and out of hand that he is wrong.
Note:LO ZIO SBORONE
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In the thickly traded parts of the stock market, where the collective power of human civilization is truly at its strongest, I doff my hat, I put aside my pride and kneel in true humility
Note:DOVE ESSERE UMILI
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If my perceptions suggest an exploitable opportunity, then my perceptions are far more likely mistaken than the markets.
Note:NON FIDARSI DI SÈ
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So, Eliezer, you think you know better than the Bank of Japan and many other central banks around the world, do you?
Note:IL SOGNO DELL ESPERTO
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Even though literally trillions of dollars of real value are at stake?
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The market also collectively knows that the Bank of Japan is pursuing a bad monetary policy and has priced Japanese equities accordingly.
Note:UNA CONOSCENZA NN SFRUTTABILE
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that fact is already priced in;
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So exactly who is it, on this theory of yours, that is being stupid
Note:CHI E PERCHÈ FA LO STUPIDO
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the Bank of Japan’s governors are not paid any bonuses when the Japanese economy does better.
Note:SBAGLIARE SENZA PAGARE
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this sounds like a perfectly normal state of affairs.
Note:TUTTO FILA IN QS DISACCORDO
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We don’t think we can predict 5% price changes in S&P 500 company stock prices over the next month, because we’re competing against dozens of hedge fund managers
Note:DOVE NN POSSIAMO ASPETTARCI MIGLIORAMENTI
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But the Bank of Japan is just one committee, and it’s not possible for anyone else to step up and make a billion dollars
Note:DOVE NN C È MERCATO PUOI FARE LA DIFFERENZA
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Even if you think you know exactly what the Bank of Japan is doing wrong, you can’t make a profit on that.
Note:NO OCCASIONI DI PROFITTO
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Bank of Japan has poor incentives
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their mistake can persist.
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we have a completely different picture from the modest one.
Note:UN ALTRA OPINIONE
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it is perfectly plausible for an econblogger to write up a good analysis of what the Bank of Japan is doing wrong,
Note:ALTRO ORIZZONTE EPISTEMOLOGICO
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without a deep agonizing episode of Dunning-Kruger-inspired self-doubt
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Indeed, if John had looked further into the issue, he would have found (as I found while writing this) that Nobel laureates had also criticized Japan’s monetary policy.
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L OBIEZ DEL MODESTO
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“Hold up! You aren’t so specially blessed
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Civilization isn’t so inadequate after all!
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It doesn’t make much difference to my life whether I understand monetary policy better than, say, the European Central Bank,
Note:INCENTIVO
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My wife has a severe case of Seasonal Affective Disorder.
Note:ANEDDOTO
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should I assume that my civilization is being opportunistic about seeking out ways to cure SAD,
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Should the fact that putting up 130 light bulbs isn’t a well-known next step after lightboxes convince me that my bright idea is probably not a good idea, because if it were, everyone would already be doing it?
Note:CURARSI COME NESSUNO FA È UNA CATTIVA IDEA
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We might call this argument “Chesterton’s Absence of a Fence.” The thought being: I shouldn’t build a fence here, because if it were a good idea to have a fence here,
Note:L ARGOMENTO DEL RECINTO
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How strongly should I expect that this extremely common medical problem has been thoroughly considered by my civilization,
Note:LA DOMANDA
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I wouldn’t necessarily expect any medical researcher ever to have done a formal experiment
Note:PROBABILMENTE IL TUO CASO È UNICO
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Nor would I strongly expect the intervention, if initial tests found it to be effective, to have received enough attention
Note:IL PARTICOLARE PERSONALE E LA MIA ATTENZIONE
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this line of thinking is just an excuse?
Note:ATROCE DUBBIO
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And as of early 2017, with two winters come and gone, Brienne seems to no longer have crippling SAD—though
Note:GUARITA
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usually done—then you’ll need to conceptually divide our civilization into areas of lower and greater competency.
Note:DOVE L ESPERTO E' ESPERTO
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isn’t actually helpful for figuring out when you might outperform some aspect of the equilibrium.
Note:DOVE TI FREGA LA MODESTIA
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2. An Equilibrium of No Free Energy
Note:2@@@@@@@@@@@@@QUANDO INCIDE IL DILETTANTE?...QUANDO L EQ È LOCALE...QUANDO C È POCA DOMANDA...SULLE BASSE PRORITÀ...CIVILTÀ ED EFFICIENZA
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an efficient market, from an economist’s perspective, is just one whose average price movement can’t be predicted by you.
Note:DEFINIZIONI
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An efficient price can update sharply:
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What people hear when you talk about “efficient prices” is that a cold-blooded machine has determined that some people ought to be paid $9/hour.
Note:UN CONCETTO AUTOMATICO
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prediction market
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The point of a prediction market is that it summarizes all the information available to the market participants.
Note:PM
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Today’s markets may not be efficient relative to the smartest hedge fund managers, or efficient relative to corporate insiders with secret knowledge that hasn’t yet leaked.
Note:EFFICIENTE RISPETTO A CHI?
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The startup equity market was inefficient (a price underwent a predictable decline), but it wasn’t exploitable.
Note:INEFFICIENTE MA NON SFRUTTABILE. NON SFRUTTABILE: NON PUOI COSTRUIRE UN DUTCH BOOK
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If we expect the stock market to be well-priced, shouldn’t we expect the same of houses? The answer is “no,” because you can’t short-sell a house.
Note:SHORTSELL E INEFFICIENZA
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At one point during the 2016 presidential election, the PredictIt prediction market—the only one legally open to US citizens (and only US citizens)—had Hillary Clinton at a 60% probability of winning the general election. The bigger, international prediction market BetFair had Clinton at 80% at that time.
Note:UN CASO APPARENTE DI DUTCH BOOK... MA POI SCOPRI CHE C'ERANO LE COMMISSIONI
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I could have bought Clinton shares at 60 cents on PredictIt and Trump shares at 20 cents on Betfair,
Note:VINCITA SICURA... SENZA COMMISSIONI
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Efficiency: “Microsoft’s stock price is neither too low nor too high, relative to anything you can possibly know about Microsoft’s stock price.”
Note:I TRE GRADI DELL'EFFICIENZA... PRIMO
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the market as a whole isn’t rational, but it contains participants who have money and understand housing markets as well as you do.”
Note:NON SFRUTTABILITA'
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there’s no well-known but unused way to save ten thousand lives for just ten dollars each, right? Somebody would have picked up on it! Right?!”
Note:ADEGUATEZZA
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if there’s a convincing case that this property does not hold, we’ll say this subsector is inadequate (at saving 10,000 lives for $100,000).
Note:EQUILIBRIO INADEGUATO
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academic research.
Note:FONTE DELL'INADEGUATEZZA
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academics and grantmakers,
Note:I PROTAGONISTI
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researchers who are individually eager and collectively opportunistic for publications—papers
Note:ASUNTO
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strong progress toward tenure.
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large number of citations
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citations per day of work.
Note:UNITÀ DI MISURA
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the average price of a citation;
Note:DA SAPERE
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we still end up with an academic system that is inadequate?
Note:ANCHE ASSUMENDO IMPARZIALITÀ NEI FINANZIATORI
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quality-adjusted life-year (QALY)
Note:MISURA DI UTILITÀ DELLO STUDIO MEDICO
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Suppose that most grantmakers pursue, say, prestige per dollar.
Note:A PEGGIORARE LE COSE
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in newspapers around the world in close vicinity to phrases like “Stephen Hawking”
Note:QUEL CHE VOGLIONO
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microHawkings per dollar,
Note:UNITÀ DI MISURA
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what if there’s some intervention which could save 100 QALYs/$, yet produces neither great citations nor great prestige?
Note:INCONVENIENTE
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grossly inadequate systems tend systematically to be unfixable by individual non-billionaires.
Note:SQUILIBRI NN SFRUTTABILI
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even systems that are horribly inadequate from our own perspective are still in a competitive equilibrium.
Note:EQUILIBRIO
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the Free Energy Fallacy,
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“This system’s purpose is supposed to be to cook omelettes, and yet it produces terrible omelettes. So why don’t I use my amazing skills to cook some better omelettes and take over?”
Note:FEE
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everyone within the system is intensely competing along other dimensions
Note:DIMENSIONI
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looking for whether the researcher is from a high-prestige institution or whether the paper is written in a style that makes it look technically difficult. Being good at cooking omelettes doesn’t make you the best competitor
Note:REQUISITI X PUBBLICARE
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Your good omelette technique might be a bonus, but only if you were already doing everything else right
Note:BONUS
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The grantmakers have no free money to give you to run your omelette-cooking experiment, because there are thousands of researchers competing for their money,
Note:COMPETIZIONE X I SOLDI DEL FINANZIATORE
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What inadequate systems and efficient markets have in common is the lack of any free energy in the equilibrium.
Note:EMH E INADEGUATEZZA
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the competition for free energy may not correspond to anything good from your own standpoint, and as a result you may label the outcome “inadequate”; but there is still no free energy.
Note:INADEGUATEZZA RELATIVA MA IN EQ
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do anything within the system
Note:IMPOSSIBILE LAVORARE NEL SOSTEMA
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For any actor to do the best thing from an altruistic standpoint, they’d need to ignore all of the system’s internal incentives pointing somewhere else,
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FUORI DALL ACCADEMIA
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backwards reasoning from inadequacy to incentives.
Note:IL NN USO DELLE SCOMMESSE ACCADEMICHE O DEI PM...ROBIN HANSON... ARG X INADEGUAYEZZA
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Returning to that business of stringing up 130 light bulbs around the house to treat my wife’s Seasonal Affective Disorder:
Note:TORNIAMO AL CASE STUDY...UN ESP XSONALE. CURARE LA DEPRESSIONE (SAD)DELLA MOGLIE ILLUMINANDO LA CASA...SE IL SOLE FUNZIONA FUNZIONERÀ ANCHE LA LICE ARTIFICIALE...XCHÈ GLI ESPERTI NN CI HANNO PENSATO?
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Before I started, I tried to Google whether anyone had given “put up a ton of high-quality lights” a shot
Note:PRIMA VERIFICA
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when I didn’t find anything on Google, I went ahead and tested the idea myself,
Note:TESTONE
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I didn’t assign such a high probability to “if this is a good idea, people will have tested it and propagated it to the point where I could find it”
Note:RAZIONALISMO
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I initially tried ordering the cheapest LED lights
Note:IMPORTAZIONE DA HONG KONG
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But when the cheap lights finally arrived from Hong Kong, they were dim, inefficient, and of visibly low color quality. So I decided to buy the more expensive US light bulbs
Note:SECONDO TENTATIVO
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So I ordered a used $6 edited volume on Seasonal Affective Disorder, in case my Google-fu had failed me,
Note:IL DUBBIO CHE LA LETTERATURA ACCADEMICA ONLINE NN SIA LA MIGLIORE
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I say this to emphasize that I didn’t lock myself into my attempted reasoning about adequacy when I realized it would cost $6 to perform a further observational check.
Note:IL RISCHIO CHE VORREI EVITARE NELLA MIA STRATEGIA
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And the higher-intensity light therapy does seems to have mostly cured Brienne’s SAD. It wasn’t cheap, but it was cheaper than sending her to Chile for 4 months.
Note:ALL APPARENZA
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is it truly plausible that no academic researcher out there has ever conducted the first investigation to cross my own mind?
Note:MA XCHÈ GLI SPECIALISTI HANNO TRASCURATO QS SOLUZIONE?
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Is that really so non-obvious?
Note:Ccccccccccf
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when something like this doesn’t get done, there’s usually a deeper reason than “nobody thought of it.”
Note:IL SOSPETTO
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that says something about a lack of incentives to be creative.
Note:FORSE
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Inadequate systems tend systematically to be systemically unfixable;
Note:RIGIDITÀ
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I don’t expect the system to be that exploitable in dollars or esteem, even though it is exploitable in personalized SAD treatments.
Note:IPOTESI
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there’s a big difference between “caring” and “caring enough to prioritize this over nearly everything else I care about,” and it’s the latter that would be needed for researchers to be willing to personally trade away non-small amounts of expected money or esteem for new treatment ideas.
Note:XCHÈ NN ABBIAMO COLONIZZATO LO SPAZIODESTINANDO QUALCHE PIANETA A SPAZZATURA....DOMANDA: SE FOSSE POSSIBILE TRASPOSTERESTE TUTTWA LA SPAZZATURA SU MARTE?
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Japanese asset markets shot up as soon as it became known that the Bank of Japan would create more money, without any need to wait and see—so
Note:XCHÈ NN PUOI ARRICCHIRTI ANCHE SE CONOSCI LA MACRO MEGLIO DEL BANCHIERE CENTRALE...IL MERCATO LA CONOSCE MEGLIO DI TE
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I could be unusually right about macroeconomics compared to the PhD-bearing professionals at the Bank of Japan, but that weirdly low-hanging epistemic fruit wasn’t a low-hanging financial fruit;
Note:METTERE A FRUTTO LA CONOSCENZA EPISTEMICA
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Where reward doesn’t follow success, or where not everyone can individually pick up the reward, institutions and countries and whole civilizations can fail at what is usually imagined to be their tasks.
Note:UN DISALLINEAMENTO CHE CREA DANNI ALLE DEMOCRAZIE
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Inexploitability
Note:UNA PAROLA
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Insofar as agents have overlapping goals, it will therefore often be harder than it looks to find real instances of exploitability,
Note:UN FATTORE FATTORE BLOCCANTE
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Nash equilibria, commons problems, asymmetrical information, principal-agent problems, and more.
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CONCETTI UTILI X PARLARE DELL INADEGUATEZZA
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it’s trivial to come up with an a priori inadequacy argument for just about anything.
DIMOSTRA TROPPO?
