[lbo-talk] What's the deal with conservatives, economists, and the minimum wage?

Doug Henwood dhenwood at panix.com
Fri Jan 19 07:45:10 PST 2007


On Jan 19, 2007, at 9:37 AM, Willy Greenfields wrote:


> Doug wrote:
>
>> There's nothing to make people think the price of an
>> asset at time t+1 will be greater than the price at
> time
>> t than the fact that the price at time t is greater
>> than that at t-1, and t-1>t-2, etc.
>
> You and Woj seem to be talking about two different
> things. Woj's basically on about discounted cash flow
> whereas you're invoking the greater fool theory. Woj
> is very much correct in theory. You are correct from a
> practical standpoint (most markeet participants are
> not securities analysts).
>

I'm talking Keynesian theory, which is that expectations for the future (which are, after all, what are plugged into a discounted cash flow analysis) are formed by recent experience. There is also the rational bubble argument, the polite term for the greater fool theory, which holds that it makes sense to buy a security you know is overvalued if you think you can unload it in the future at a higher price.

Doug



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