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This is the death of the efficient markets hypothesis -- a moment of silence

Most people who go to Davos just eat some good food and listen to some dull speeches. Not Daniel Gross. He went to Davos and disproved the efficient-markets hypothesis:

This afternoon, while walking into the Congress Center, the main hub of Davos, I noticed a piece of gray paper on the floor. It looked like it might be currency of some sort — certainly not a dollar, but perhaps Swiss francs or something else. I started to bend over to pick it up, but then I caught myself. This is the World Economic Forum. It is populated by hundreds of economists and by thousands of business people schooled in the tenets of economics. This is possibly the most rational, profit-maximizing concentration of human capital in the world. These are the actors who make up an efficient market. And of course adherents to the efficient market hypothesis famously don't believe in the concept of found money or found savings.

An old joke. Two economists are walking down the street. One says: "Hey, there's a dollar bill on the floor." The other says: "Impossible. If it were real, someone would have picked it up by now."

But I'm a connoisseur of economic irrationality. And so I bent down and picked up the paper. On one side, the grim visage of Queen Elizabeth. On the other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just lying on the floor, unmolested by Nobel Prize-winning economists, CEOs of Fortune 500 companies, and financial journalists.

By Ezra Klein  |  January 29, 2010; 3:16 PM ET
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You can't spot things on the floor when you have your head tilted far enough back to look down your nose at everyone.

Posted by: AuthorEditor | January 29, 2010 3:32 PM | Report abuse

Very nice.

As someone who disagrees with the efficient markets hypothesis I am loathe to make this argument, but here it goes. Perhaps it was merely the principle of opportunity cost at work. In Mankiw's Principles of Economics I am pretty sure he gives the example of it not being worth Bill Gates' time to stop and pick up a penny. That second or two could have been more productively been employed by him because he makes so much money that not spending time making money is a huge tradeoff. (I suppose one could argue that if Bill Gates really ENJOYED picking up the penny it would be worth it.) In any case, that must be what at is work in Davos. The time spent there is so valuable that "wasting" a few seconds to pick up ten pounds is too high of an opportunity cost.

Posted by: Castorp1 | January 29, 2010 3:34 PM | Report abuse

Darwin's on the 10 pound note? Holy cannoli. Imagine if someone tried that here!

Posted by: bcamarda2 | January 29, 2010 3:51 PM | Report abuse

I agree! It's not worth the time to pick it up. Unless, you think there might be many many 10 pound notes out there. Then you could build a machine to pick them up without bending or stopping. Like that thing that picks up tennis balls or golf range balls.

Posted by: ideallydc | January 29, 2010 3:52 PM | Report abuse

A sad reminder that the Brits' currency is better than ours. Even with that stuffy old lady they put on the front.

Posted by: slag | January 29, 2010 4:25 PM | Report abuse

It's anecdotal, but another excuse for Klein to push his bias.

Posted by: msoja | January 30, 2010 12:02 AM | Report abuse

I'm convinced - now I can go quit my job and just walk around Davos picking up 10 pound notes!

Posted by: js0891 | January 30, 2010 7:42 AM | Report abuse

Castorp1 didn't quite say it right. It's not worth anyone's time to _walk around searching_ the floor for ten-pound notes.

Posted by: MikeR4 | January 31, 2010 2:47 PM | Report abuse

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