Comment by jgeada
2 days ago
Markets can remain irrational, or colluding, far longer than you can stay solvent (or even alive).
For example, while the Phoebus cartel only really lasted from 1925 through to 1939, 1000hr incandescent light bulbs remain the standard offering till present day. Profitable market manipulations are sticky.
The whole notion that markets are efficient is just a mathematical construct that has become very dogmatic for people. But if you look into the details, markets are efficient under the assumptions of perfect information and infinite time. Neither of those conditions are present in the real world: we neither have perfect information nor infinite time.
> the Phoebus cartel
> 1000hr incandescent light bulbs remain the standard offering till present day
This proves in fact that all the cartel did was establish a standard, an optimal average between various tradeoffs when building an incandescent lightbulb: brightness, cost, efficiency and life span. Yes, the cartel behaved anti-competitively. The effect on the market? Nil.
> perfect information and infinite time
There is absolutely no requirement for this for markets to work. Markets work just fine with partial information and just-in time. When new information and new market participants appear, markets will self-correct. The only way to prevent markets from working is through government intervention.
In facts, free markets are the only system we have that works with incomplete info and reacts in real-time. Central planning will happily decide on incomplete info then never adapt. We saw that during communism when the Party decided allocate X resources for production of Y and it always resulted in a glut or shortages. Central planning doesn't work.