The Efficient Market Hypothesis often seems to suggest only that most people cannot outguess the financial markets. But the originator of the hypothesis, Eugene Fama, made the stronger claim that people cannot outguess the financial markets because financial-market prices are correct: They incorporate all known information accurately. This view omits the role that human traders’ interpretations of information must play if the information is to prompt them to buy or sell. Buyers and sellers disagree about the meaning of current information, (...) so at least half of them must be wrong. Bringing in many more (but equally fallible) people to predict the future does not somehow make their (collective) answer “right.” This is a logical disproof of the Fama hypothesis, but the inherently speculative nature of financial markets makes its empirical falsification (or verification) ambiguous if not impossible. The hypothesis must therefore be considered an unscientific article of faith. (shrink)

In lieu of an abstract, here is a brief excerpt of the content:154, DAVID HUME'S PRACTICAL ECONOMICS As Professor Eugene Rotwein emphasized in his introduction to David Hume: Writings on Economics (Madison, 1955), the philosopher made his observations on the eve of the industrial revolution in a period of accelerating change. Very often — as in the latter half of the seventeenth century — times of flux and turmoil call forth Utopian thinkers, who propose the creation of hierarchical, communal, authoritarian (...) societies, often patterned after a supposed golden 2 age. Hume emphatically rejected Utopian schemes of this kind. "All plans of government which suppose great reformation in the manners of mankind," he said, 3 "are plainly imaginary." He repeatedly warned as well that "projectors" and visionaries would disrupt the balance in government between liberty and authority. Thus he could speak of or make reference to "the visionary system or ravings of Plato" (in The Republic), the ultimate impracticality of More's Utopia and James Harrington's The Commonwealth of Oceana, and the absurdity of Robert Wallace's theories on 4 population and the paper money schemes of John Law. Even the Utopian republics of Andrew Fletcher of Saltoun, the Scottish patriot whom Hume admired as "a man of undaunted courage and inflexible principles," were dismissed with the others on practical grounds. The key word we have extracted from Hume's economics is practicality. Much as Hume would have liked to have designed an empirical "science of man" — which, incidentally, would have permitted him to propose his own infallible scheme of political economy — he realized that his own attempts had fallen far short of his goal. Thus his nine essays devoted especially to economics: "Of Commerce," "Of Refinement 155. in the Arts," "Of Money," "Of Interest," "Of the Balance of Trade," "Of the Jealousy of Trade," "Of Taxes," "Of Public Credit," and "Of the Populousness of Ancient Nations," are cautious in approach and pragmatic in spirit. Most of these essays were specifically designed to challenge prevailing assumptions and Utopian grand schemes of one sort or another. In "Of Commerce," for example, Hume rejects the idea that a nation can achieve greatness as an agricultural utopia. In "Of Refinement in the Arts" he takes issue with certain religious thinkers who 7 denote luxury as evil. In "Of Money" he is critical of those who believe that an injection of money into O the economy will work long-term wonders, and in "Of Interest" he argues with those who reason that the 9 plenty of money leads to low interest rates. "Of the Balance of Trade" and "Of the Jealousy of Trade" are directed against the protectionist policies of the mercantilists, "Of Taxes" rejects the French physiocratic single tax on land, and "Of Public Credit" deplores the expedients of Lord Oxford's partisans to draw bills on posterity and imprudently 12 use public credit to create paper riches. Finally, he addressed his essay, "Of the Populousness of Ancient Nations" to a refutation of the doomsday thinking of 13 the Reverend Robert Wallace of Edinburgh. This is not to imply, however, that Hume's economic thought was merely negative, or that he believed governments could safely entrust their powers over the economy to an "invisible hand." Even Hume's advocacy of free trade (which his friend and pupil Adam Smith, of course, applied with less caution) left the government with room to maneuver. Hume was willing to employ both the market and authority in designs for human progress. In seeking his mix of "action, 156. consumption, liveliness and indolence," a contradictory, counter-poised economic actor, the individual, was not a simple pleasure maximizer, nor did the acquisition of wealth and luxury make him a villain. He was a person in whom the complex springs of action, the causes of labour, needed first one, now another counter-weight. Society benefited from both 14 free trade and from tariff. Hume believed that industrial development and the advancement of commerce were the springboards to progress and happiness. Less is less and more is more; Hume never got these simple verities mixed up. "The same age," he said, "which produces great philosophers and politicians, renowned generals and poets, usually abounds with skillful weavers, and ship-carpenters.... The spirit of the age... (shrink)

We can observe in the progression of the work of Thomas Hobbes through David Hume to John Rawls a development from a focus on severe disorder to order under law and then to concern with distribution. This striking development is not due simply to changes of normative views, but is in large part about the technical or virtually technological capacities of government. There are also non-normative theoretical and significant developments in their theories. Hence, much of the difference between these philosophers, (...) who superficially appear to disagree deeply, is essentially social scientific. If so, they should all be willing to revise conclusions to fit better social science. This is not the whole story, perhaps, or if it is, then we have to conclude that all of them make big scientific mistakes that vitiate their theories. On this view, Hume comes closest to having the theory right in his time and his account is more compelling as a social scientific account of our issues than are the accounts of Hobbes or Rawls. Key Words: Hobbes • Hume • Rawls • social science • order • justice • technology. (shrink)

This article provides information about Berne's financial situation at the time the Economic Society was founded. The canton was in an exceptionally fortunate position, having accumulated a sizeable cash reserve that was in part used for loans and investments on the London capital market. Throughout the century, the Bernese government followed a very cautious investment strategy. The main reason for purchasing overseas securities was that they helped the patricians to become independent from tax-paying subjects. Economic imperatives ruled out increases of (...) the cash reserve or further involvement in the overcrowded domestic capital market. However, by investing abroad Berne became increasingly dependent on the goodwill of its debtors, for which it was criticised by the Economic Patriots amongst others. (shrink)

The essays in this book began as a contributions to a Summer Workshop arranged by the Calgary Institute for the Humanities, and haled at the University of Calgary from July 7 to 14, 1978. The Institute, which was founded by the University in 1976 for the encouragement of humanistic studies, has held such conferences each summer as a part of its programme of research.