Walking home from the Metro today I saw a $5 on the sidewalk. How funny, I thought to myself as I walked past the bill, isn't there some saying in economics about how you never see a $5 on the sidewalk? Then greater wisdom cut through the travel-induced fatigue and I remembered to pick up the money.
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Freakonomics
30 Apr 2007 01:32 am
Comments (23)
Why would you even think of passing up $5 on the sidewalk? It would likely pay for the next bottle of beer at the bar, or at least pay for half the price of a pitcher of the most expensive brew in the house.
It's the old Chicago School joke. Two Chicago School economists are walking down the street and see a $5 bill on the ground.
"Look," says one, "a $5 bill!"
"Impossible," says the other. "If it were there, someone would already have picked it up."
Speaking of Chicago, I once found $140 sitting on the street on Halsted.
ps Thanks to the
Some Asshole:
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Posted by Some Asshole
format, we'll never again wonder who posted something.
Don't forget to pick up a half-gallon of milk and a loaf or two of bread on the way home.
Love,
The Wife
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You get the idea. I'm annoyed by this format too.
It's $100,000 book advances that encourage thinking twice about picking up $5 bills.
I'm down with the prepended comment byline in principle, but the design is off. The "Name:" colon format makes it seem as though the comment is addressed to "Name". Setting it off with some color or font variation would be nice.
Petey:
Petey:
Petey:
I don't think the new format goes far enough.
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Petey:
Petey:
Petey:
Petey:
Petey:
Petey:
Seriously, it's easy to get confused about who's posted what. The new format clears things up.
Posted by Petey
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The lack of the Recent Comments feature is the real problem with the new setup.
It had a lot to do with keeping the comments section lively.
Adam:
I see what you mean.
"I'm down with the prepended comment byline in principle"
Why?
You're all obviously just a bunch of nuts talking to yourselves.
Hey, is this the official "bitch (in the nicest, politest manner, of course) about the new format" post?
Let me agree with Petey that I miss the "Recent Comments" part of the sidebar.
I would just like to note that I took a gander at the Atlantic front page, and it looks good. The funny thing was that they had a link to the "Earthships" post there at the time, except the link was spelled "Earthsips". And I thought, that's what they get for bringing Yglesias on board.
Oh, I do like the irony of the sidebar link to "Complete Archives", too.
I had a similar experience recently. Also in Washington, at lunchtime, I found a $10 bill and immediately picked it up. I just as quickly realized, a little shamefacedly, that someone had to have dropped it just a second before if it was still there for me to find it. I looked, and, sure enough someone was grabbing at his pockets. I did the decent thing.
Excellent, ajay.
A couple of years ago when I was driving back from my interview with the job I have now, I noticed a $20 bill lying in the middle of the street, so I pulled over and collected it. I took that as a good sign.
This was in San Marino, California, though, where the median home price is probably more than $1.5 million.
speaking of finding $5 bills, AND chicago, AND buying beer: i found a $5 bill on belmont and i thought "hey now i don't have to buy high life" and so i bought stella artois instead.
the moral of the story? i should have been walking down halsted.
The "theory" that it couldn't be a $5 bill on the street because someone else would have already picked it up is the Efficient Market Hypothesis. That's the same theory that says you can't find any values in the stock market, because, other investors would have already noticed them and bid up the stock's price until it was no longer a value.
Warren Buffett mocked that theory in this famous presentation to the Columbia Business School 23 years ago: The Super Investors of Graham-and-Doddsville. Graham of course refers to Benjamin Graham, grand daddy of Security Analysis and Warren Buffett's mentor; Dodd was a student of Graham's who co-authored the seminal text Security Analysis
"The "theory" that it couldn't be a $5 bill on the street because someone else would have already picked it up is the Efficient Market Hypothesis."
I've always been confused by this analogy. Isn't it possible that you are the first person to have walked by the bill since it was dropped? Isn't it possible that new information has just come in to the market?
"I've always been confused by this analogy. Isn't it possible that you are the first person to have walked by the bill since it was dropped? Isn't it possible that new information has just come in to the market?"
The apparent contradiction lies in the gap between the market being efficient most of the time versus it being efficient all of the time. Efficient Market theorists are right that the market is mostly efficient, but they are wrong when they claim it's so efficient that, short of luck, no one could consistently outperform it. Buffett refutes their extreme view in the Super Investors essay by giving copious evidence of Graham-influenced investors who consistently outperformed the market over long periods.
The joke about the two professors walking by a $20 bill on the street was initially aimed at EM theorists such as Eugene Fama at the U. of Chicago -- the point of the joke is that these professors are so committed to their theory that concrete evidence (whether a $20 bill on the street or the tables of returns Buffett lists in "Super Investors") has no impact on their views.
Some time ago, I read an article about an economist's real world experiment. Over some years, he kept track of the change he saw on the ground on his walk to work.
The increase in the value of the change on the ground matched the inflation rate perfectly. So it's just a matter of time before you'll pass by the $5 in the same way you'd pass by a single penny.
Makes sense.
Comments closed May 14, 2007.
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Heads in the Sand
Crap. That's where it went.
Posted by thehim | April 30, 2007 1:56 AM