Comments on: The Tragedy of the Commons http://www.theamateurfinancier.com/blog/the-tragedy-of-the-commons/ Thoughts on Money, Investing and Life Wed, 08 Feb 2012 18:41:13 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Roger http://www.theamateurfinancier.com/blog/the-tragedy-of-the-commons/#comment-239 Roger Mon, 27 Jul 2009 04:20:29 +0000 http://www.theamateurfinancier.com/blog/?p=739#comment-239 @Rob: I'm not sure that the Tragedy of the Commons is the right metaphor to use for unrealized gains that are lost during a market downturn. The commons were a natural resource that had intrinsic value, while the stock market only had theoretical value. That said, I am not that familiar with the research you mentioned. I must admit, it does seem logical to decrease the portion of your money in stocks when the stock market is overvalued, although how to do so while still keeping the gains that the stock market offers seems rather tricky... @SJ: Thanks for stopping by. I'm not sure I recognize that joke, but I appreciate your interest in my humble blog. See you around. @Rob:

I’m not sure that the Tragedy of the Commons is the right metaphor to use for unrealized gains that are lost during a market downturn. The commons were a natural resource that had intrinsic value, while the stock market only had theoretical value.

That said, I am not that familiar with the research you mentioned. I must admit, it does seem logical to decrease the portion of your money in stocks when the stock market is overvalued, although how to do so while still keeping the gains that the stock market offers seems rather tricky…

@SJ:

Thanks for stopping by. I’m not sure I recognize that joke, but I appreciate your interest in my humble blog. See you around.

]]> By: SJ http://www.theamateurfinancier.com/blog/the-tragedy-of-the-commons/#comment-238 SJ Sat, 25 Jul 2009 03:55:13 +0000 http://www.theamateurfinancier.com/blog/?p=739#comment-238 This reminds me of "arms races" as mentioned in the economic naturalist. You need socialism (1), true costs (2), govt regulation (3) lol... I think I liked how the book used sports and animals; why do hockey players play w/ helmets and why don't antlers get excessively huge lol... This reminds me of “arms races” as mentioned in the economic naturalist.

You need socialism (1), true costs (2), govt regulation (3) lol…

I think I liked how the book used sports and animals; why do hockey players play w/ helmets and why don’t antlers get excessively huge lol…

]]> By: Rob Bennett http://www.theamateurfinancier.com/blog/the-tragedy-of-the-commons/#comment-236 Rob Bennett Fri, 24 Jul 2009 14:40:02 +0000 http://www.theamateurfinancier.com/blog/?p=739#comment-236 I believe that our entire economic crisis is the result of a Tragedy of the Commons phenomenon. The Passive Investing concept (the idea that it is not necessary to lower one's stock allocation at times of insanely dangerous prices) was discredited by academic research done 28 years ago showing that valuations affect long-term returns. Had the "experts" let us know, the bull market would never have gotten so out of control and we never would have seen such a devastating stock crash. Why didn't they let us know? All humans have a Get Rich Quick impulse and want to believe the fantasy that there is no need to lower one's stock allocation when prices go insane. Most of the "experts" are involved in some way in The Stock-Selling Industry. They all profit from telling us what we want to hear (and from believing it themselves, to be sure). If there were some way to make money giving accurate and realistic investing information, thousands would do it and we all would benefit because we would not experience stock crashes. But there is no profit in giving people investing information that actually works, only in giving them investing information that makes them feel good about bad decisions they have made. Rob I believe that our entire economic crisis is the result of a Tragedy of the Commons phenomenon.

The Passive Investing concept (the idea that it is not necessary to lower one’s stock allocation at times of insanely dangerous prices) was discredited by academic research done 28 years ago showing that valuations affect long-term returns. Had the “experts” let us know, the bull market would never have gotten so out of control and we never would have seen such a devastating stock crash.

Why didn’t they let us know? All humans have a Get Rich Quick impulse and want to believe the fantasy that there is no need to lower one’s stock allocation when prices go insane. Most of the “experts” are involved in some way in The Stock-Selling Industry. They all profit from telling us what we want to hear (and from believing it themselves, to be sure).

If there were some way to make money giving accurate and realistic investing information, thousands would do it and we all would benefit because we would not experience stock crashes. But there is no profit in giving people investing information that actually works, only in giving them investing information that makes them feel good about bad decisions they have made.

Rob

]]> By: Weakonomics Links: Mangagement or Egoeconomics? | Weakonomi¢s http://www.theamateurfinancier.com/blog/the-tragedy-of-the-commons/#comment-235 Weakonomics Links: Mangagement or Egoeconomics? | Weakonomi¢s Fri, 24 Jul 2009 14:17:32 +0000 http://www.theamateurfinancier.com/blog/?p=739#comment-235 [...] The Amateur Financier talks about a basic economic term called “The Tragedy Of The Commons”.  It’s best used to illustrate why we can’t seem to get control of certain aspects of economics.  Today the best application of the tragedy is with the environment.  Every year countries get together and promise to cut pollution but no one ever really follows through.  Perhaps why this is can be explained by the tragedy. [...] [...] The Amateur Financier talks about a basic economic term called “The Tragedy Of The Commons”.  It’s best used to illustrate why we can’t seem to get control of certain aspects of economics.  Today the best application of the tragedy is with the environment.  Every year countries get together and promise to cut pollution but no one ever really follows through.  Perhaps why this is can be explained by the tragedy. [...]

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