I wrote a post recently on the Efficient Market Hypothesis in which I said
But the EMH, if you don’t take it too literally and get carried away about axiomatically defining strong, weak and other kinds of efficiency as though you were dealing with axiomatic quantum field theory, does recognize one true thing: that it’s #$&^ing difficult or well-nigh impossible to systematically predict what’s going to happen. You may think you know you’re in a bubble, but you still can’t tell whether things are going up or down the next day. The EMH was a kind of jiu-jitsu response on the part of economists to turn weakness into strength. “I can’t figure out how things work, so I’ll make that a principle.”
Two follow ups:
1. Someone sent me this link to
The Ockham webcrawler thinks that #$&^ING is a reference to the Dutch banking giant. This is #$&^ING ignorance.
2. In Krugman Blog
Krugman says that, rather than saying the EMH turns weakness into strength, I should have said that the EMH turns ignorance into strength.
I don’t really agree. What’s behind the EMH isn’t ignorance about how markets “really” behave. Ignorance implies eventual knowability. I think it’s more likely #$&^ING inability to know how they behave, because how they behave may not be time invariant.